Rakon completes $45M share placement at discount; stock tumbles as halt lifted

Wednesday 23rd September 2009

Rakon Ltd., the manufacturer of components for navigation devices, completed its $45 million placement to expand its Chinese manufacturing operations.

The Auckland-based manufacturer sold the shares at $1.10 apiece, a 26% discount, and plans to raise a further $20 million via a share purchase plan. The shares tumbled 13% to $1.29 when they resumed trading, after being halted for the sale.

Rakon is funding a new manufacturing facility in China in conjunction with joint venture partner, Timemaker, expanding output to meet forecast demand growth. Some $30 million of Rakon’s capital injection will be used for the first construction stage of the Chinese factory. Additional funds will be used to repay debt and settle its $6.3 million deferred consideration with Timemaker.

The company was forced to eliminate jobs and slash costs as the global economic slump eroded demand, causing annual profit to tumble 59%.

The drop in the shares “is reflecting the dilution,” said Paul Harrison, who manages about $150 million at BT Funds Management. “The market was happy to support the placement and could see the potential to manufacture in a low-cost country.”

Managing director Brent Robinson said Rakon has planned to expand in China last year but the global economic slump meant the move was shelved. As sales bounced back faster than anticipated, the proposed expansion plans were revived.

Rakon founder Warren Robinson participated in the share purchase plan, and was issued $1 million worth of shares immediately before the placement, the company said yesterday. The offer was also endorsed by director and share-holder Peter Maire.

Businesswire.co.nz

Comments from our readers

No comments yet