Durban – Omnia Holdings continued its downward spiral on the JSE yesterday, falling more than 8 percent in early trade after the group announced a R2 billion fully underwritten rights offer in an effort to reduce its debt.
The diversified chemicals and fertiliser maker flagged that its board had decided to issue 100 million shares at a subscription price of R20 a rights offer share to address its escalating debt.
It said shareholders backed the rights offer after it was approved at a general meeting last month.
Omnia chairperson Ralph Havenstein said the willingness of the asset managers to underwrite and price in advance of a rights offer circular being issued had allowed them to remove uncertainty around the process and to set the subscription price.
“As a result, the need for the standby underwrite agreement concluded with our banks fell away. Receiving support from prominent asset managers who represent our shareholders Allan Gray, Coronation, Foord, Kagiso, Old Mutual and Prudential affirms the investment case for Omnia as we continue to strengthen our financial position and execute on our strategy,” Havenstein said.
The shares closed 1.47 percent lower at R33.57 from Thursday’s close of R34.07.
In May, Omnia announced that it planned to negotiate a suitable long-term capital structure that would include a capital injection through a fully underwritten rights issue of R2bn to reduce overall debt levels.
Omnia reported debt of R4.4bn at the end of March, and the debt level shot up after it acquired Umongo Petroleum for R780 million in 2017 and Oro Agri in 2018 for $100m (R1.52bn).
The group has a standby underwriting agreement with Absa Bank, Investec Bank, Rand Merchant Bank, a division of FirstRand Bank, and Standard Bank but said the agreement was no longer required.
It said it was in the process of finalising and obtaining the required approvals for the rights offer circular, which is contemplated to be published at the end of the month.
Omnia is a diversified chemicals group that supplies chemicals and specialised services and solutions for the agriculture, mining and chemical applications industries.
In the year to the end of March, Omnia reported a 98percent decline in operating profit to R24m from R1.16bn in the comparative period last year, while revenue increased 7 percent to R18.63bn from R17.37bn.