Brazilian meat processor JBS is offering a 4.5 percent premium to buy a controlling stake in industrial automation manufacturer Scott Technology as part a capital raising to cut the Dunedin-based company's debt levels.
JBS Australia, an existing Scott customer, has put forward an offer to merge with Scott via a scheme of arrangement, which requires 75 percent shareholder approval, where it would buy 10 million shares at $1.39 apiece and offer to pay existing investors the same price. That would be followed by a one-for-eight non-renounceable rights issue at $1.39 for shareholders who didn't want to be diluted, then a further placement to give JBS 50.1 percent of the company. That's a 4.5 percent premium to the $1.33 price the shares traded at before the announcement.
"Scott Technology Ltd has previously indicated to shareholders that the company was considering a capital raising to reduce debt following recent business acquisitions and to provide working capital to fund further growth," chairman Stuart McLauchlan and chief executive Chris Hopkins said in a statement. "Having started on this journey, and after considering the company's size and level of institutional interest in Scott, the company believed our growth aspirations would be best achieved with a relevant industry-based cornerstone investor."
Scott had net debt of $24 million as at Feb. 28 after a series of acquisitions in recent years, the latest being this year's purchase of Australian business Machinery Automation and Robotics for A$13 million.
The placement would raise $13.9 million and if no shareholders sold to JBS, a further $7.9 million would be raised through the rights issue, meaning the Brazilian company would have to pay a further $69.5 million for about 50 million more shares to get a controlling stake.
Scott's board is hiring an independent adviser to prepare its report on the merger, and the various regulatory approvals are expected to take several months to complete. Once that's done, shareholders will invited to a meeting to vote on the proposed merger, and whether or not they wanted to sell to JBS, or participate in the rights issue.
The company's biggest shareholder is Dunedin-based Oakwood Securities with about 14 percent, followed by Fisher Funds with 8.9 percent, and the Urquhart family interests with 8.2 percent.