GENERAL: ALF: Allied Farmers Seeks $19.30 million

3 Aug 2010 9:53 am

ALF 03/08/2010 GENERAL

REL: 0953 HRS Allied Farmers Limited

GENERAL: ALF: Allied Farmers Seeks $19.30 million

Allied Farmers Seeks $19.30 million

Allied Farmers today announced a partially underwritten $19.30 million capital raising as the company seeks further cash injections to achieve longer term business plans and reduce debt.

The capital raising, which has been partially underwritten by McDouall Stuart Group Limited for $9 million, will consist of two parts:

An institutional placement raising $2.25 million at 2.5 cents per new share; and

A rights issue to current Allied Farmers shareholders entitling them to 1 new share at 2.5 cents for every 3 shares held.

Allied Chairman John Loughlin said McDouall Stuart had today arranged a placement of $2.25 million to a number of institutions and professional investors, which when combined with the underwritten component of the total capital raising would mean that at least $9 million would be raised.

"I am also encouraging our current shareholders to take up their rights, not only to support the business and its future plans, but also to avoid any dilution effect from the capital raising".

"In raising any capital we are mindful of the interest that has been shown by a number of our investors in supporting the company. We have decided that the rights issue with a placement is the best current option for us to bring in fresh capital to launch some of our planned initiatives and gives us the time needed to realise good value from our asset portfolio, and continue our focus on reducing debt. We are conscious of giving existing investors the opportunity to further invest in the company and believe rights issues are the appropriate format to look after the interests of existing investors."

The new shares will be offered at 2.5 cents per share, which represents a discount to Allied Farmers' current share price of approximately 5.5 cents per share. In addition, to protect investors in the capital raising from any future erosion in the net tangible assets of Allied Farmers, the number of shares issued will be increased next year if the Group's net tangible assets are less than the issue price at the June 30, 2011 financial year end. The details of this adjustment mechanism will be set out in the prospectus.

John Loughlin said that given the continuing challenges in the rural and finance sectors, coupled with the current market for the realisation of the ex-Hanover and United assets, we felt it appropriate to recognise and protect the downside risk for investors.

As an additional benefit, the rights to new shares will be renounceable. This means that shareholders who do not wish to subscribe for more shares can sell their rights, which may have a value, through the NZX rights trading facility. However, for those shareholders who want to invest more than their entitlement, provision has been made for oversubscriptions (allowing shareholders to apply for additional new shares).

Allied Farmers has also, subject to compliance with its placement rights under the Listing Rules, provided the sub underwriters with a right (but not obligation) to apply for any shares not taken up in the offer or committed under the underwriting.

Mr Loughlin said, "Allied Farmers' expects the finance sector and asset values to recover in time and the recently completed sale of Five Mile, for close to its latest valuation, demonstrates what Allied Farmers can achieve from the former Hanover assets. However, in a market in which demand and finance for property development was flat, realising good value from further asset sales would continue to take time."

"We continue to seek opportunities for realising value from those assets and we have a number of initiatives planned for our rural services businesses that will differentiate our business and stimulate our market share." "It will take time to fully realise that value, attract fresh capital to implement initiatives and reduce debt levels. The recent extension to our banking arrangements with Westpac, albeit with restructuring and capital raising milestones that are required to be met, signalled confidence in our plans, which we too are confident provide a solid foundation for our future growth."

"We are seeing some signs of recovery in the rural sector - especially on the back of the dairy payout - and we have confidence that the rural services sector, including the finance sector, will recover. But that recovery will also take time."

Mr Loughlin expected the prospectus to be lodged early next week with the document in the mail to shareholders from about 11 August.

Media Inquiries to: Malcolm Boyle/Alan McDonald Star Public Relation Allied Farmers 09 912 7827 or 021922 022 or 0212 813 004

Rob Alloway Manager Director, 09 912 7827 or 021922 022 or 0212 813 004 021 376642

Offer Timetable 10 August Record date for Rights Issue Entitlements 11 August Offer opens and prospectus mail out begins 24 August Rights trading ceases on NZX 30 August Closing Date for Offer 6 September Allotment of new shares and statements issued

6 September New shares begin trading on NZX End CA:00197953 For:ALF Type:GENERAL Time:2010-08-03:09:53:39

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