Omnia shares surge ahead of underwritten equity raising

Shares in Omnia surged as much as 18.4% on Wednesday after the group confirmed that institutions had agreed to underwrite a R2bn rights offer aimed at ensuring the heavily indebted chemicals and fertiliser maker remains sustainable.

The group’s shares rallied to R41.83, the best level in more than two months, even though Omnia said it would issue the shares at less than half that price. Omnia plans to raise R2bn by placing 100-million shares at R20 apiece.

The equity raise is part of a plan to “safeguard its ability to continue as a going concern ... and to maintain an optimal capital structure resulting in a reduced cost of capital”, Omnia said late on Tuesday.

“To maintain or adjust the capital structure, the company may adjust the dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt,” it added.

Because of acquisitions and investments in new plants and systems, Omnia’s net interest-bearing borrowings ballooned to R4.4bn by the end of March, from R2.5bn a year before. The group made a loss after tax of R407m in the year to end-March, from a profit of R664m the previous year.

Omnia said it would use the proceeds of the rights offer to partly repay a R6.8bn bridge debt facility. “The rights offer will reduce debt levels to be within the company’s targeted range, thereby affording the company access to undrawn debt facilities and reducing the company’s cost of capital.”

Allan Gray, Coronation Asset Management, Foord Asset Management, Kagiso Asset Management, Old Mutual Investment Group and Prudential Investment Managers SA recently agreed to fully underwrite the rights offer.

The company previously raised the ire of some analysts after making a surprise request for more shareholder funding.

In April, Omnia said “there is no requirement for any unscheduled repayment or recapitalisation”. Weeks later, it said it needed to raise new equity as part of a capital restructuring. This was to ensure its “long-term sustainability” amid hefty annual losses and a growing debt burden.

hedleyn@businesslive.co.za