Infant formula group Wattle Health is likely to be off the ASX for a month as it attempts to raise up to $75 million to help fund a push into organic dairy production in a highly volatile sector.
Wattle on Friday asked that its voluntary suspension from trading on the ASX which had already run for two weeks from April 6, be extended until May 7 at the latest.
Wattle last traded at $2.26 and it floated on the ASX in early 2017 in a small raising with an issue price of 20 cents. It has plenty of skeptics because it produces only small revenues but has big ambitions.
There is speculation it is trying to raise $75 million, with roadshows occurring early next week in Asia with privately-owned family office wealth managers Cannacord Genuity and Ord Minnett thought to be involved.
The extended ASX trading halt reinforced the wild ride shareholders have been on with Wattle in an infant formula sector where volatility has been a constant in bigger ASX-listed stocks such as Bellamy’s Australia.
Bellamy’s shares have doubled in the past four months to more than $20. Bubs Australia, which made a big acquisition in goat’s milk with the $80 million acquisition of NuLac Foods announced in early November, has also been on a rollercoaster ride.
Bubs shares were trading at 81.5 cents on Friday after falling from $1 in late February. They were sitting at just 65 cents on February 19.
Wattle’s executive chairman Lazarus Karasavvidis said on Friday the extended voluntary suspension would enable Wattle “to manage its continuous disclosure obligations” pending the finalisation of joint venture arrangements with Organic Dairy Farmers of Australia and potential capital raise.
Wattle revealed on April 10 it would inject $63 million into a joint venture entity with the organic dairy farmers co-operative in Victoria that will build and operate a large milk spray drying plant to process up to 200,000 litres of fresh organic milk per day.
The joint venture with the organic dairy farmers co-operative will be known as Corio Bay Dairy Group. Wattle Health will hold a 45 per cent stake in the joint venture vehicle, with the co-operative owning 50 per cent. Another entity, Niche Dairy, will hold 5 per cent. Niche Dairy was a founding partner of one of the biggest dairy processing plants in Australia, Blend and Pack.
The new organic milk spray drying plant will be built at North Geelong in Victoria on land adjacent to an exiting processing operation built in 2016 by the Organic Dairy Farmers of Australia, which operates at a site close to the former Ford engine plant.
Construction and land acquisition costs will be $55 million, with the rest of the funds needed for working capital.
As seen in the Financial Review on April 20th 2018.