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Ebos to raise $150M in discounted placement, eyes more M&A

Tuesday 30th April 2019

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Ebos Group plans to raise $150 million in a discounted placement to pay down bank debt and reduce gearing as it eyes acquisition targets. 

The pharmaceutical and animal health products company said it will issue approximately 7.7 million new ordinary shares at an issue price of $19.70 each to institutional investors in Australia, New Zealand and selected jurisdictions. That's about 5 percent of the 152.8 million shares on issue. 

The price represents an 8 percent discount to yesterday's closing price of $21.42. The placement is fully underwritten by UBS New Zealand, which is acting as sole lead manager and underwriter. 

"Proceeds from the placement will initially be used to pay down bank debt and reduce gearing, before being used for strategic acquisitions, organic growth initiatives and general corporate purposes as they arise," the company said. 

Following the placement, pro-forma net debt to earnings before interest, tax, depreciation and amortisation as at Dec. 31, 2018, will decrease to approximately 1.6 times from 2.16 times. 

The reduced level of gearing will give it greater flexibility to pursue strategic acquisitions and organic growth initiatives, it said.

"Ebos is assessing several acquisition targets within our core segments that will add greater diversification to the group and provide synergies through the use of Ebos' existing network and capabilities," said chief executive John Cullity. 

It said it is considering a number of bolt-on M&A opportunities across both the healthcare and animal care segments, including opportunities to acquire healthcare consumer brands, opportunities in the medical devices and consumables sectors, pharmacy sector expansion and expansion in animal care. 

Several organic growth opportunities may also require capital, including funding the development of existing brands into new growth markets such as Asia. 

Ebos has invested more than A$600 million in acquisitions and capital expenditure since the 2014 financial year. Key purchases included Black Hawk for A$57 million in 2014, Red Seal, for $80 million in 2015 and HPS for A$154 million in June 2017. 

The six months through December were marked by several strategic acquisitions for a total investment of A$92.5 million. They included a move to 100 percent ownership of Terry White Group along with another three small-to-medium sized bolt-on acquisitions.

The dual-listed company has a market capitalisation of approximately $3.27 billion and generated $7 billion of revenue last year, 79 percent in Australia and 21 percent in New Zealand. 

Ebos also confirmed its full-year guidance of underlying earnings growth in FY19 with further growth forecast into FY20 as it commences servicing Chemist Warehouse contract volumes. 

Ebos has signed a contract with Chemist Warehouse Group for the exclusive wholesale distribution of pharmaceutical products to more than 450 Chemist Warehouse and My Chemist stores in Australia from July 1.

Sales to the CWG stores are estimated to generate approximately A$1 billion in revenue in the 2020 financial year.


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