A New Zealand billionaire has snared a 39 per cent stake in woodchipper Gunns as part of a $280 million capital raising.
The move could help Gunns secure a partner for its controversial pulp mill proposal in Tasmania.
Richard Chandler, who now resides in Singapore and is the former chairman of the Sovereign group of companies, will emerge with the key stake after paying $75 million for a share placement and another $75 million for a bond with attaching convertible warrants.
Separately, Gunns will raise as much as $130 million through a rights issue from other shareholders at 12 cents a share.
Existing shareholders will be entitled to 1.3 new shares for each share held.
Gunns managing director Greg L’Estrange said he was confident the agreement would help the company find a joint venture partner for the planned $2 billion Tamar Valley pulp mill in northern Tasmania.
Mr L’Estrange said Mr Chandler supported the pulp mill and was likely to boost public confidence in the project.
“Having this organisation as a partner in the project, it provides not only credibility for the community but they’ll understand the requirements of governance and transparency are held in the utmost level within the organisation,” he told the ABC.
Gunns shares surged by more than 56 per cent on the news, but eased back to close 36 per cent, or 4.5 cents, higher, at 17 cents.
Morningstar analyst Peter Warnes said the plan was massively dilutive to existing shareholders with shares on issue increasing from 848 million to 2,576 million before the exercise of warrants.
“If successful, the proposal probably ensures the future of the company and the Bell Bay Pulp Mill,” Mr Warnes said.
Mr Chandler, who is worth around $4 billion, has investments in companies in Asia, Africa, Latin America and Europe, in a range of industries.
Richard Chandler Corporation senior adviser Alan Kelly said the corporation would work with Gunns to facilitate the development of Tasmania’s Bell Bay Pulp Mill.
“We believe it will make a significant long-term contribution to the Tasmanian and Australian economies,” Mr Kelly said in a statement.
A shareholders’ meeting is expected to be held in late April to vote on the proposed financing deal.
The proposed terms of the deal are non-binding and subject to approvals from the Australian Securities Exchange, Gunns shareholders and the Foreign Investment Review Board.
Gunns says the proceeds of the capital raising venture will be used to reduce the company’s debt.
It comes just over a week after 10 bankers agreed to extend the terms of Gunns’ syndicated debt facility and primary working capital facilities until December 31 this year.
Gunns in December slashed its expected earnings by up to $20 million, saying it expected underlying earnings before interest and tax (EBIT) to be $30 million for the 2012 financial year.
The company is in the process of settling the $120 million sale of its Green Triangle Forest Estate, which will go towards debt reduction.
