King Salmon to sell shares at $1.12 apiece in IPO, raising $77.5 mln

Friday 23rd September 2016

New Zealand King Salmon plans to sell shares at $1.12 in an initial public offering, giving one of its cornerstone shareholders an exit from the Marlborough Sounds fish-farmer and raising $30 million of new capital.

The Nelson-based company wants to raise up to $77.5 million selling as many as 69.2 million shares in an IPO, listing on the NZX and ASX next month. Of the funds raised, up to $45 million would go to Direct Capital, letting the private equity firm exit its shareholding, and $2.5 million to other shareholders including its other cornerstone investor, Malaysian-owned Oregon Group.

King Salmon plans to use $16.7 million of the new capital raised to repay bank debt and shareholder loans and $8.2 million to partially fund a new farm, while $5.1 million will be gobbled up by offer costs.

The offer has attracted food investor China Resources Ng Fund, which bought a 15 percent of apple exporter Scales Corp from Direct Capital in March, and the New Zealand Superannuation Fund. The Chinese firm will take a 10 percent stake and NZ Super will hold a 5.5 percent share.

King Salmon is projecting revenue of $130.1 million in the year ending June 30, 2017, for a profit of $10 million, compared to a $2.6 million profit on sales of $114.1 million in 2016. That's expected to rise again in 2018, generating revenue of $143.6 million and a profit of $14.1 million.

The offer document forecasts dividends of $5 million in 2017 and $5.6 million the following year, implying a gross dividend yield of 4.5 percent and 5 percent respectively.

The company operates seven farms in Marlborough's Pelorus and Queen Charlotte Sounds and has three new farms coming on stream. The consents for the new sites were opposed by environmental groups all the way to the Supreme Court in 2014, which succeeded in winning a protection of "outstanding landscapes" and ruling out another proposed farm.

King Salmon projects $15.3 million of capital expenditure for the next two years to develop two seafarms and establish a third, and estimates a further $8 million to $10 million is needed over 15 years which will be funded through operating cash flows.

The company is marketing itself as an export opportunity, with plans to reduce its reliance on New Zealand consumers, lifting its exposure in Asia and Europe, and building on its existing North American sales channel.

The offer values King Salmon at $154.5 million, slightly more than media group NZME which was carved out of APN News & Media earlier this year and below robotics manufacturer Scott Technology.

The offer opens on Oct. 3 and closes on Oct. 14, with trading expected to start five days later. First NZ Capital and Macquarie Capital are joint lead managers of the offer.

BusinessDesk.co.nz

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