Omnia to raise R2 billion through rights issue

The company would use the proceeds to reduce its debt.

South Africa-based chemicals and fertiliser maker, Omnia, plans to raise as much as R2-billion through a rights issue that is priced at R20 per share.

Omnia, which said in May it would use the proceeds to reduce its debt, will issue 100 million shares, it said in a statement on Monday. Omnia’s shares on the Johannesburg Stock Exchange slumped as much as 8.6 percent in early trade on Monday but finished 1.5 percent lower on the day.

Shareholders raised concerns about the fact that Omnia wants to raise R2 billion, which is closer to its market capitalisation of R2.4 billion. Existing Omnia shareholders might be diluted and forced to take up their rights.

Omnia’s debt soared after the acquisitions of lubricants supplier Umongo Petroleum and Oro Agri, a producer of agricultural biological products. Net interest-bearing borrowings stood at R4.403 billion at the end of March 2019.

According to Omnia, the rights issue is part of a plan to reduce the ratio of net debt to earnings before interest, taxes, depreciation and amortisation (ebitda) from 3.9 times to 2.4 times. Net debt-to-ebitda measures the indebtedness of a company and the number of years it would take a company to pay back its debt. In the 2018 financial year, the debt-to-ebitda ratio was 1.7 times.

The firm said it had also agreed an underwriting deal with investors Allan Gray, Coronation Asset Management, Foord Asset Management, Kagiso Asset Management, Old Mutual Investment Group and Prudential. As a result of this, a standby underwriting agreement with banks had been terminated, it added.

“Receiving support from prominent asset managers who represent our shareholders affirms the investment case for Omnia as we continue to strengthen our financial position and execute on our strategy,” newly appointed Chairman Ralph Havenstein said.

Omnia, which also produces explosives, said in June it would evaluate the returns from its business units and look at cost cutting as it grapples with high debt and thin margins.

The company reported a headline loss per share of 112 cents for the year ended March 31, against a profit of 991 cents a year earlier, hurt by a volatile currency, drought, changes in the mining industry and difficult global trading conditions.