Dawn rights issue to target R350m
Dawn, the struggling building materials specialist, will raise R350m in a rights issue in an effort to reinforce a brittle balance sheet. The development comes little more than a week after it warned investors that it would report a 79c a share headline loss for the year to end-March.
Distribution and Warehousing Network (Dawn), the struggling building materials specialist, will raise R350m in a rights issue in an effort to reinforce a brittle balance sheet.
The development comes little more than a week after Dawn warned shareholders it would report a 79c per share headline loss for the year to end March.
On Wednesday, Dawn, now headed by former Hudaco CEO Stephen Connelly, said shareholders representing more than 60% of the issued share capital supported the proposed rights offer. That seems to suggest major shareholders — mobility conglomerate Imperial Holdings and large investment house Coronation Fund Managers — are supporting the rights issue.
The price that the rights offer will be pitched at has not been disclosed, but there has been speculation it could be 200c per share. Dawn’s shares have been trading around the 250c level in recent weeks, close to the last stated tangible net asset value of around 250c per share.
There was reference to a potential underwriter for the rights issue, but the identity of the party was not disclosed.
The proposed rights issue comes after Dawn considered various initiatives to strengthen its balance sheet. There were initially expectations that Dawn could sell off operational assets, after recently disposing of its 49% stake in Heunis Steel. There were rumours Dawn would sell its 49% stake in Grohe Dawn Watertech joint venture.
The company’s interim report to end-September noted that noncore businesses including joint venture arrangements, would be disposed of and the proceeds used to lower the future funding required for working capital.
Dawn hoped to issue a rights offer circular to shareholders next week to implement the offer in early March.
Opportune Investments CEO Chris Logan said the rights offer showed that the interventions to turn Dawn around came too late. “The writing seemed to be on the wall years ago. This once again shows that when worrying trends become evident shareholders cannot afford to sit on their hands.”