Freedom Foods says about 77 per cent of a $130 million production upgrade announced last week will be spent at its Shepparton milk processing plant.
The spending commitment comes as shrinking farm milk supplies and rising dairy processing costs costs last week prompted Fonterra to announce it was closing its Dennington milk factory in south western Victoria, with the loss of about 100 jobs.
Freedom is raising the funds from shareholders to significantly boost its northern Victorian plant’s specialist dairy nutritional production capacity, including developing new protein extraction lines, and to satisfy strong demand for long life dairy products.
Already it has secured almost $120m in funds from institutional investors whose strong support for the company’s expansion push saw its share offer for new shares at $4.80 each oversubscribed.
We firmly believe this continuing investment demonstrates our commitment to Shepparton and the broader region as it secures jobs and supports the local dairy industry
– Rory Macleod, Freedom Foods
Managing director, Rory Macleod, said the placement was «significantly oversubscribed», with strong demand from a broad range of high quality institutional investors.
«The new equity raising has the company’s Shepparton plant as the primary focus,» he said.
«About $100m will be invested in a further and accelerated upgrade of the Shepparton facility.
«We firmly believe this continuing investment demonstrates our commitment to Shepparton and the broader region as it secures jobs and supports the local dairy industry.»
Mr Macleod said customers increasingly recognised Freedom’s broad range of UHT capabilities Shepparton and the company’s new Ingleburn plant in Sydney.
Despite the dairy industry experiencing a testing time as dry seasonal conditions drained milk supply options, Freedom would increase its milk pool to more than 400 million litres in 2019-20.
«The company is taking an industry-leading role to meet the greater demand for UHT dairy products in Australia, South East Asia and China,» he said.
«Shepparton is also key to our ability to value-add, and our new investment plans for the nutritional ingredients business will help meet the strong demand as we expand capacity and extend into new protein streams.»
Freedom Foods is the business group behind the Australia’s Own, So Natural, Almond Breeze and Kids’ Milk dairy and plant-based products and the Freedom, Heritage Mill and Arnolds Farm cereal brands.
Existing institutional shareholders took up 92 of their share increase opportunities in the company last week, leaving about $11.2m to be raised from retail shareholders from May 29.
The offer closes on June 11.
The offer price represents a 5.5pc discount on the volume weighted average price of Freedom Foods shares in the 20 days before the capital raising opened last week.
Veritas Securities Limited (Veritas) and UBS AG, have fully underwritten the equity raising.