The sale of the Freedom Foods Group’s cereals and snacks business to the Arnott Group has been completed. The sale was announced in December, just weeks after reporting the “deeply disappointing” loss of $ 175 million in fiscal year 20.
Michael Perich, CEO of FFG, said the sale was part of his simplified business strategy to focus on “the brands and products with the greatest potential in our dairy, food and herbal beverages business”.
Freedom Foods’ sales down 10.7% in the third quarter
Freedom Foods Group had sales of $ 141.6 million for the third quarter of fiscal year 21, a decrease of 10.7 percent of $ 17 million. The company said the quarter-on-quarter decline was broadly in line with expectations.
Snapshot:
- Total Revenue $ 141.6 million, down $ 17 million, or 10.7%, from the previous quarter;
- Dairy and Nutritionals sales were $ 91.5 million, a decrease of $ 16.7 million, or 15.2%, a decrease from company expectations.
- Plant-Based Beverage Revenue: $ 37.3 million, up $ 2.4 million, or 7%, more than expected by companies;
- Specialty Seafoods had sales of $ 2.9 million, a decrease of $ 0.5 million or 13.7% – a decrease from company expectations;
- Cereal & Snacks sales $ 10.3 million, down $ 1.7 million, or 14% – a decrease from company expectations;
- Company cash position $ 20.6 million; and
- Recapitalization plan announced on March 19th, trading resumed on March 22nd.
Domestic UHT dairy sales declined as private label milk flow rates were weaker than in the previous quarter.
Consumer foods like Crankt were the same as the second quarter, but sales of nutritional ingredients, primarily lactoferrin, declined.
The focus of the business is on reducing waste, improving production efficiency, eliminating unprofitable products, optimizing milk supply and reducing losses from the sale of surplus milk.
Herbal beverages saw strong category growth and Milklab sales rose due to increased out-of-home sales and exports.
The group had $ 333.9 million of available funding facilities in the third quarter of which $ 331.9 million had been drawn.
In the third quarter, nearly $ 4.5 million was paid to people and businesses associated with the Perich family.
Extraordinary general meeting called
The FFG will hold an extraordinary general meeting on May 25th at 10 a.m. The company announced that it will seek multiple unconditional approvals for certain features of the recapitalization announced on March 19.
Two of the 13 resolutions considered include:
- Resolution 1: Issue notes to Arrovest and Arrovest’s ability to convert those notes into shares; and
- Resolution 2: Issue bonds as part of the wholesale investor offering and convert these bonds into shares.
The Board of Directors recommended that shareholders vote in favor of Resolution 1 despite the fact that the Independent Expert had completed the proposed issue of shares to the majority shareholder and the investment vehicle for the Perich family. Arrovest was “not fair but reasonable” non-associate shareholders in converting the Notes. In the absence of a ‘superior alternative’ proposal, the advantages of voting for the resolution outweighed the disadvantages of rejection.
The raising of capital includes:
- a wholesale investor offer of up to US $ 130 million to eligible investors; and
- a $ 200 million placement with Arrovest if the company has the option to reduce Arrovest’s investment to at least $ 135 million, depending on the level of participation in the wholesale investor offer.
The wholesale investor offer is expected to close on Friday (May 7th). Depending on the size of the stake, FFG has agreed to use between $ 183 million and $ 233 million of the proceeds to repay its existing senior term, revolving debt and subordinated facility.
The Board strongly believes that debt issuance is the preferred structure for raising capital.