Infratil plans to sell about 100 million new shares at $4 each to help fund its $3.4 billion purchase of Vodafone New Zealand.
The underwritten offer is structured as a $100 million placement of 25 million shares to institutions. The balance will come from an accelerated renounceable entitlement offer, which existing shareholders can subscribe for at a rate of one new share for every 7.46 shares held at the close of trading on Tuesday, May 21.
The $4 application price is a 10.4 percent discount to the volume-weighted trading price the past five days.
Infratil shares last traded at $4.45. The stock has gained about 22 percent so far this year.
Infratil is making the Vodafone purchase in partnership with Canada's Brookfield Asset Management. Each will put in $1.03 billion with Vodafone taking on $1.34 billion of debt. The deal remains conditional on regulatory approvals.
"Undertaking a placement and entitlement offer to raise new equity is the best option for the company and its shareholders," Infratil said. "The equity raising balances the desire of the board to direct a significant proportion of the equity raising towards existing shareholders whilst providing the opportunity to introduce new, supportive institutional and retail shareholders to the register through the placement."
The balance of Infratil's consideration will be funded through a combination of $400 million of debt from a committed acquisition debt facility and the use of existing debt facility headroom.
"The funding package, including the new equity, is expected to leave Infratil's balance sheet in a position to support growth and future development platforms," chief executive Marko Bogoievski said.
Trading of Infratil's shares was halted today for the institutional elements of the offer, which will be completed on Monday.
The retail offer opens May 23, with the new shares expected to be allotted on June 18. All the new shares will qualify for the company's 11-cent final dividend - the dividend reinvestment plan won't apply.
Infratil today reported a 1.2 percent decline in underlying operating earnings to $539.5 million for the year ended March 31. The decline was due to almost $103 million of portfolio incentive fees paid to contract manager HRL Morrison and Co.
Excluding fees, earnings before interest, tax, depreciation, amortisation and changes in financial instruments rose 20 percent to $581.1 million from $482 million.
The company last month lowered its ebitdaf guidance for the period to $535-$545 million, reflecting the increased incentive fees, a delay booking the gain on the sale of Longroad Energy's Rio Bravo wind project in Texas, and weaker contributions from other assets.
The improved results were driven by strong performances from Longroad, Tilt Renewables, Wellington International Airport and Canberra Data Centres. They offset lower earnings from Trustpower and RetireAustralia.
The company, which this week announced its planned Vodafone NZ purchase, sells assets and reallocates capital into more material opportunities in faster-growing sectors.
In the past five years it sold out of Z Energy and its Lumo energy business in Australia and expanded into retirement housing in Australia, data management and renewables in the US through Longroad Energy. Canberra Data Centres has overtaken Wellington Airport as its second-biggest asset.
Agreed sales in the past year include New Zealand Bus, student accommodation at Australian National University and its Snapper transport card.
Today the company said Perth Energy no longer fits its portfolio. Negotiations have started with prospective buyers with the aim of completing a sale in the current financial year.
Excluding the earnings of NZ Bus, Perth Energy, ANU and other investments the firm has quit, Infratil said underlying ebitdaf from continuing operations was $477.5 million.
Including a seven-month contribution from Vodafone, it expects underlying earnings for the current year from continuing operations of $635-$675 million.
The company will pay the final dividend on June 27 to shareholders registered at June 21. The 11 cents per-share payout is up from 10.75 cents a year earlier and takes full-year dividends to 17.25 cents a share.