Wattle Health Australia Limited announced that it has inked a $75 million debt facility term sheet to fund support its acquisition of Blend and Pack (B&P).

The debt facility is to be secured by US-based investment manager, Gramercy Funds Management LLC, on behalf of its managed vehicles and funds. As per the term sheet, the facility has been agreed upon for a term of four years with 9% of annual coupon rate and an Original Issue Discount (OID) of 15%.

After evaluating financing options, the company decided to adopt a debt facility despite equity. The move explains the company’s strategy to ensure limited dilution to shareholders while financing the acquisition of Blend and Pack for 75% holding at US$55 million.

Although, the term sheet is subject to final due diligence by Gramercy, if the agreement goes through Gramercy will reportedly receive ~14.5 million ordinary shares in an escrow account for the term of 48 months or prepayment, whichever falls earlier.

Exotix Capital, the investment bank based in London (UK), is acting as placement agent for the debt facility. Andrew Moorfield, Head of Natural Resources of Exotix, stated that “this is a major institutional debt raise for Wattle Health and is a reflection on the strength of the company’s management team & the significant growth potential offered through the B&P acquisition.”

On 11 February 2019, Wattle Health announced that that it has entered into an agreement with Mason Group Holdings Limited to buy majority stakes, i.e. 75%, in Blend and Pack (B&P), which would take its total holding to 80%. The debt facility announced now allows WHA to complete the acquisition in a single transaction instead of going through option structure that required several milestone payments.

Overview of Blend and Pack (B&P)- B&P, an independent company, provides packaging and processing of nutritional dairy products, and is reportedly the largest firm in the sector by volume. Major domestic and international nutritional dairy companies are B&P’s client. B&P’s projected revenue is greater than $31 million and $59 million for FY20 and FY21, respectively, subject to SAMR approval for B&P nominated brands. B&P was granted with CNCA or the Certification and Accreditation Administration of People’s Republic of China, which was successfully renewed in January 2019.

Lazarus Karasavvidis, Executive Chairman of WHA, stated that this acquisition well positions the company to control full vertical integration value from farm to consumer. He also mentioned about the world-class quality, manufacturing and packaging standard maintained by company.

However, the acquisition remains subject to approval from WHA shareholders. It is scheduled to be obtained in an Extraordinary General Meeting (EGM) due to be held in June 2019. The company further intends to undrawn Prospere Advisors Ltd loan on the completion of above stated $75 million debt issue.