Bega Cheese to raise A$200m as it weighs up Capilano Honey bid

The Australian dairy company could use the funds to spark a bidding war with Wattle Hill and Roc Capital for the listed honey producer.

Australian dairy and food company Bega Cheese is set to raise more than A$200 million ($142 million; €123 million) from investors amid market speculation that it may join a takeover battle for Sydney-listed Capilano Honey.

Bega announced on Monday that it would raise approximately A$200 million from an institutional share placement and up to another A$50 million from a share purchase plan offered to existing eligible shareholders.

The proceeds will be used to reduce debt following the acquisition of the Koroit dairy processing plant, which Bega acquired from Saputo Dairy Australia for A$250 million this year, as well as to improve Bega’s financial flexibility “to take advantage of future growth opportunities in dairy and food,” it said.

These opportunities could include a move for Capilano Honey, which is currently subject to a take-private bid from Bravo HoldCo, a consortium comprising Wattle Hill RHC Fund and Roc Capital. That deal, which aims to target growth opportunities in the Chinese market, values Capilano at approximately A$190 million.

Bega has increased its stake in Capilano since that offer was made public, taking its holdings to around 8.4 percent of Capilano’s shares. Fresh funds could be used to help support a full takeover bid.

“Bega Cheese has always had a commitment to maintaining a strong balance sheet and this capital raising ensures we are appropriately geared should further opportunities arise,” executive chairman Barry Irvin said.

The raising is expected to complete on September 17. Bega Cheese could not be reached for comment at the time of publication.