TUF gets nod for Bt10-bn rights offering

Thai Union Frozen Products, which has been hot on the acquisition trail, yesterday received board approval to raise Bt10 billion in a rights offering to support further expansion.

“The fund-raising will accelerate the company’s plan to reduce TUF’s financial gearing. Although we are comfortable with the current financial position, we believe it is advantageous to prepare ourselves for any future growth opportunity that might require additional financing,” said Thiraphong Chansiri, president and chief executive officer of the country’s biggest seafood exporter.

Shareholders can subscribe to the new shares at the ratio of one new share for every five existing shares at a price of Bt50.

In total, 202,813,450 new shares will be issued for the rights offering as well as an adjustment to the number of shares reserved for outstanding convertible bonds.

An extraordinary shareholders’ meeting will be called for April 10 to vote on the resolution.

Bualuang Securities is the financial adviser for the recapitalisation. 

Thiraphong said the move would also minimise TUF’s risk exposure in light of the current chaos in global financial markets.

The boost in capital will help TUF achieve its four objectives, including reducing its financial risk exposure and increasing its borrowing capacity.

The other three objectives are preparing the firm for future growth opportunities, particularly merger and acquisition opportunities, reducing its interest burden by as much as Bt600 million per year and improving its profitability, and restoring the normal dividend pay-out policy of at least 50 per cent of net profit.

Last year, TUF’s success in taking over MW Brands and integrating the European food company into its operations was recognised by the strong performance of TUF’s stock. 

Last year, TUF’s net debt-to-equity ratio stood at 1.44 times. The company plans gradually to bring the ratio down without new capital from shareholders. It targets a debt-to-equity ratio of 1 by the end of 2013. The capital-raising could bring the figure down to 0.8. 

“Moreover, as the new funds will first be used to pay down the company’s existing debts, that should also help reduce our interest expenses by as much as Bt600 million per year and boost our earnings in 2012 and allow us to return to the normal 50-per-cent dividend pay-out policy,” Thiraphong said.