Wellard Limited CEO and major shareholder Mauro Balzarini is selling just under half of his shares in the publicly listed livestock exporting company.
The sale will finalise an outstanding loan arrangement between Wellard Ltd and Mr Balzarini’s company WGH Holdings.
Under the announced agreement the shares will be bought by Wellard Limited’s Chinese Joint Venture Partner the Fulida Group, one of the largest non-state owned enterprises in China.
Upon finalisation of the deal, which is expected to occur within one week, Fulida will take a 16.58pc share in Australia’s largest livestock exporting company, making it Wellard’s second largest shareholder.
The value of the transaction has been nominated in a Wellard statement to the ASX today at US $25 million, in exchange for capital and debt owed by WGH to Fulida (more detail below).
Under that transaction, Wellard Ltd shares are valued at around 50c, a significant premium to Friday’s closing rate of 23.5c.
The transaction has removed uncertainty that the outstanding loan will be repaid, and gives Wellard Limited access to $16 million in operating cash.
The market has responded positively, with Wellard shares rising from 23.5c at the market close last Friday to 30c at lunchtime today.
Mr Balzarini’s company WGH Holdings still holds 20pc of Wellard Limited’s shares and remains its largest shareholder.
Mr Balzarini has recently relocated to Singapore, having recently sold his Perth mansion. He is also currently seeking a buyer for his substantial farmland assets in WA.
An announcement by Wellard to the ASX today said WGH Holdings has signed agreements to undertake a refinancing.
Upon closing of the refinancing, expected within seven days, WGH will immediately repay the A$15.8 million separation payment due to the Wellard Limited, plus accrued interest of approximately $500,000, the statement said.
Under the same agreement, China’s Fulida Group Holdings Co Ltd – said to be one of the largest non-state owned companies in China, will take ownership of WGH’s 66.32 million Wellard shares.
Fulida is an integrated player in the textile industry headquartered in Hangzhou China. The statement said the company is also actively seeking investment opportunities in other sectors and in 2015 set up the JV company Wellao with Wellard in China.
Wellard CEO Mauro Balzarini said: “I am pleased that WGH will be in position to settle the separation payment due to Wellard. This transaction demonstrates that support for Wellard from long term investors remains strong. We welcome Fulida, who has shown a consistent interest in our industry over a long period, as a significant shareholder in Wellard, giving it exposure to the full international beef supply chain into China and other countries. That Fulida has taken an equity interest in Wellard, and agreed to voluntarily escrow its shares, highlights its belief in the long term future of our business, our industry and the potential that China represents.”
More details from this morning’s statement:
WGH has advised Wellard the following in relation to the Refinancing:
it includes a new senior loan to be advanced to WGH’s subsidiary, WGH Commodities, Land and Transport Pty Ltd (CLT), which will become the owner of WGH’s remaining shareholding in Wellard (80.0 million shares);
the new and certain existing lenders to WGH will be given security over its assets, including all of its Wellard shares, and the security held by one of its existing lenders over its Wellard shares will be released;
the security granted to WGH’s lenders over its Wellard shares does not contain margin call triggers nor other rights to dispose of the Wellard shares as a sole consequence of movements in the price of Wellard shares; and
certain WGH lenders will be granted options over some of WGH’s remaining shares in Wellard, exercisable only once the applicable shares are free from any escrow restrictions.
Share sale arrangement with Fulida
The share sale to Fulida involves Fulida effectively purchasing 66,319,999 Wellard shares from WGH, in consideration for the set-off and termination of US$25 million in total outstanding principal and debt owed by WGH to Fulida, upon and subject to closing of the Refinancing. This will give Fulida a 16.58% shareholding in Wellard.
WGH’s Wellard shares are currently subject to a voluntary escrow agreement. Wellard has consented to amendments to WGH’s escrow agreement to allow it to enter into the share sale arrangement with Fulida and for the transfer of shares to Fulida (and the intra-group transfer to CLT referred to above).
In recognition of this, Fulida has agreed to enter into a voluntary escrow agreement which subjects the transferred shares to substantially the same escrow restrictions they are currently subject to under the ownership of WGH. That is, one third (1/3) of the shares (22,106,666 Wellard shares) are subject to escrow until Wellard’s audited FY2016 results are released (scheduled for 30 September 2016) and the balance (44,213,333 Wellard shares) are subject to escrow until Wellard’s FY2017 results are released in 2017. Wellard’s entry into a voluntary escrow agreement with Fulida and CLT remains subject to it obtaining applicable specific relief from ASIC to do so.
Wellard financier approval
On completion of the Refinancing, WGH will control 20.0% of Wellard’s shares. Wellard has received conditional consent to amend the definition in the facility agreement that requires Mr Balzarini to hold directly or indirectly at least 19.90% of Wellard shares, to control at least 19.90% of Wellard shares. Wellard expects that these conditions will be satisfied in the near term.
Source: Wellard Limited