Fertiliser and rural products group, Nufarm has raised the $303 million it had been looking for in the entitlement issue that started on September 25 as it sought fresh capital to cut debt and help it ride out the East Coast drought.
But getting that money ended up being messy and exposed a lack of support from some big shareholders (including its largest) and among its retail base.
Reuters described the offer as having “been a fizzer” among the company’s retail shareholders, with only half taking up the offer and providing $31.6 million.
Reuters also pointed out that and an unknown ‘sub-underwriter’ picked up the remaining $30 million worth shares, as the company’s share price fell. That deal meant the issue was completed in full with no embarrassing shortfall.
Nufarm offered three new shares for every 19 existing shares at $5.85, which was a big discount to the then share price around $6.80.
That was down from the most recent high of $7.45 in early August. The fall was driven by growing fears (and a downgrade) that the company would be hurt by the growing Australian drought.
Meanwhile, about two-thirds of institutional shareholders accepted the offer, but major shareholder, Sumitomo Chemicals, sat it out (which was revealed at the time of the issue).
The institutions took up $238 million worth of shares to institutional investors on October 1, with 10% going for $6.35. Another $65 million was to be raised from the retail entitlement offer, which had the same conditions.
But when the retail offer closed on October 17 the share price had dipped to $5.90 (under the influence of the lower price in the institutional issue and the impact of the drought.
Solid October rains through much of NSW and parts of Queensland had no impact on the share price.
As a result, retail investors shied away from the issue and it ended up raising just $31 million from 46% of shareholders, leaving 6.2 million entitlements not taken up.
These went into a shortfall bookbuild conducted on Monday evening of this week. The shares fell again, ending up at $5.48 on Wednesday, down more than 4%.
A reason for Wednesday’s fall was a Californian appeals court upholding the awarding of damages against Monsanto (now part of German giant, Bayer) over the Roundup weedkiller, which is a glyphosate-based product.
Nufarm makes similar products and sells across the world. The damages were cut by $US200 million to a Californian man who will still be paid around $US78 million. The original award saw Nufarm shares fall 16% in a day.
Reuters said the bookbuild did not go above the offer price of $5.85 and the remaining 6.2 million entitlements went to sub-underwriters, which is believed to be an existing institutional investor, not the underwriters UBS and Macquarie Capital.
Meanwhile, the drought continues and Rabobank said in an update on Tuesday that it expects to see a sharp fall in wheat production and exports over the next year because of the dry in NSW and Queensland especially and a downturn in conditions in spring in Western Australia.
The Nufarm AGM on December 6 should see a new trading update in the wake of the raising.
