One of Australia’s largest stockbrokers has agreed to underwrite loyalty options for the country’s first ASX listed dairy farmer.
Bell Potter Securities has agreed to an underwriting deal for more than $3.5million of options issued by Australian Dairy Farms Group (ADFG), which owns six south-western Victorian farms and is buying the Camperdown processing plant.
The company has told the Australian Securities Exchange it has now secured $6.2 million in funding, through underwritten loyalty options, issued last October.
“At the time of executing the underwriting agreement, on February 3, approximately 14.9 million options remained unexercised,” the company said in a statement to the stock exchange.
“Bell Potter has underwritten the exercise of these remaining options for the sum of $3.7m.”
ADFG director Adrian Rowley said this would leave the company with $4m in debt, which he described as “conservative” - after the purchase of the Camperdown factory was finalised.
“We’ve still got the balance sheet capability to acquire a few more farms,” Mr Rowley said.
“What it means, from our perspective, is that all options will be exercised, giving us $6.2m.”
The company offered one free loyalty option, for every two stapled securities held by investors, in mid-November last year. That initially raised $2.5m, from loyalty option holders exercising their entitlements.
He said while the company did not have a set number of farms, it intended to acquire, “I would not be surprised if it’s not two or three, over the course of the year,” he said.
“We have quite a few inbound inquiries from farmers interested in us coming and having a look, we are determining our priorities to pick two or three that fit our model best.”
ADFG currently supplied Aussie Farmers Direct and Woolworths, through its Farmers’ Own and Camperdown labels.
Mr Rowley said it was hoped to complete the purchase of the Camperdown factory, by the middle of the month.
“Longer term we are obviously excited by the growing demand for milk – we are not involved in powder or infant formula, which is a phenomenal market, ours is predominantly fresh dairy products,” Mr Rowley said.
“We do export directly to China, we now have five customers (in Shanghai) selling fresh milk at the moment.”
He said processing milk through ADFG’s own factory made sense.
“It takes one of those big risks out of the market, if you are processor, you are dealing with a volatile commodity – putting the two together mitigates that commodity price risk.”
He said he was confident Woolworths would seek to continue to grow its Farmers’ Own brand.
“We are not competing with the Murray Goulburn’s or Bega’s, or those guys – we have the Farmers’ Own contract for the region we are in and that is a strategy I think they want to expand on,” he said.
“It’s a strategy to demonstrate they are supplying local Australian farmers and I think not only will they continue to support that idea, but they will grow it, over time.”