Bubs Australia, which specialises in goat’s milk infant formula, plans to raise almost AUD40m (US$29.1m) through two share offerings to partly fund its interest in a manufacturing facility in China.
Sydney-listed Bubs, which also manufactures cow’s milk formula, and cereals, rusks and snacks for toddlers, will offer more than 35 million shares at 80 Australian cents each via a private placement with the aim of raising as much as AUD28.3m.
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It will also offer more than 12 million shares at the same price through a share purchase plan (SPP) to bring in a further AUD10m, with an option to increase the targeted capital amount.
The SPP portion opens for subscription on 9 September and closes on the 23 September. Settlement of the private placement is scheduled for 10 September.
Outlining how it plans to use the funds in a notice to the Australian Securities Exchange today (3 September), Bubs said AUD12m will be allocated to fund its “proposed acquisition of ownership interest” in Beingmate’s infant formula manufacturing facility in Beihai, China, and the associated approval of a State Administration for Market Regulation (SAMR) brand slot for its formula products to be sold in China, both under an agreement announced last month.
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Another AUD10m will support its expansion “into new key markets with significant upside potential, including establishing local in-market manufacturing where preferential”.
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By GlobalDataAsked to expand on the potential new markets, a Bubs spokesperson referred just-food to a previous statement regarding the memorandum of understanding agreed with Beingmate over its interest in the Chinese factory.
“We are excited to explore replicating this ‘Created by Bubs’ localisation strategy in other key markets that show significant growth potential but where challenges exist to secure market entry.
“Stringent regulatory procedures are not unique to China. Markets like Indonesia may take up to two years to process import licences for infant formula. India applies substantial tariffs to imported infant formula brands, whilst expensive international logistics, combined with cheaper manufacturing and labour costs in North America, make the value chain challenging when compared with locally-produced products.”
And around AUD14.8m will be allocated to “growth initiatives”, including new product innovation in “emerging high value goat dairy segments” and taking its Vita Bubs supplements into the “high margin adjacent” vitamins, minerals and supplements (VMS) category.
The spokesperson said Bubs’ recent launch of Capela’s Immune Support product is an example of the “high value goat dairy segments”.
Late last year, Bubs raised AUD30m through a share placement to “improve the company’s flexibility to take advantage of future growth opportunities, accelerate customer acquisitions in existing and new markets, advance new product developments and meet M&A commitments”.
