Fletcher’s Fine Foods Ltd. is rebuilding its treasury in preparation for more investments in the processed food sector.
The Vancouver-based company announced last week it had reached an agreement with two underwriters to raise $15 million through an equity issue.
“We’ve said all along that we are interested in making strategic acquisitions of specialty brands,” said George Paleologou, vice-president and chief financial officer of Fletcher’s, in an interview from Vancouver.
“We are trying to build the prepared food division. That’s why we bought Harvest and Grimms and other companies. We basically wanted to replenish the war chest so we can continue on those possible acquisitions.”
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The deal is being underwritten by Goepel McDermid Inc. and Midland Walwyn Capital Inc. on a “bought deal” basis, meaning the underwriters will buy the shares for resale.
The company has issued the shares in the form of special warrants valued at $24.50 each. Once the prospectus detailing the deal gets approval from provincial securities commissions, expected by Aug. 20, the special warrants can be exchanged for common shares in Fletcher’s.
The company’s shares have been selling at about $24.75 recently. Paleologou said it is common in equity financing deals such as this to offer the warrants at a slight discount to the going price.
Fletcher’s has also given Saskatchewan Wheat Pool, its controlling shareholder, the right to buy shares at the same price.
The option will allow the pool to buy 500,927 special warrants and so maintain its 45 percent interest in Fletcher’s. The deal would cost the pool about $12.3 million.
Together, the two deals would give Fletcher’s about $27.3 million.
Paleologou believes the pool will probably exercise its option.
“They’ve stated they eventually want to get up to about 50 percent. If they don’t, they will be diluted a bit so we expect they will exercise their right.”
Pool chief financial officer Lyle Spencer said the Fletcher’s offer would be discussed at a board meeting this week.
