Mercer sells 130.8 million shares to fund acquisition, one-third sold to managers

Mercer has yet to quantified any costs it may face as the result of the collapse of a silo at Fonterra's Edendale factory.

Mercer Group, the unprofitable stainless steel fabricator, has issued 130.8 million new shares at 1 cent each to fund its purchase of the assets and business of Hastings-based Haden & Custance.

In November, it announced the conditional $2.25 million deal, which adds a robotics system used to prepare bulk products such as cheese and butter for processing, and offices in Melbourne, Australia, and Wisconsin in the US.

Christchurch-based Mercer raised $7 million through an underwritten rights issue this year, going towards repaying debt and providing the firm with working capital, though the H&C acquisition needed new funding.

The company wants to reposition the steel business's focus to food processing and packaging technology, giving it exposure to higher-value export business.

Some 44.5 million shares from the placement were sold to company management.

Chief financial officer Ian McGregor bought 17.5 million shares, chief executive Richard Rookes bought 12 million shares, director John Dennehy bought 10 million shares and director Paul Smart bought 5 million, according to NZX filings.

Adding the US office is expected to help sell Mercer's Titan slicer and Beta cheese processing products, with the acquisition projected to deliver "material" savings and set up "the platform for sustainable profitability", Rookes told BusinessDesk in November.

Rookes said there was an opportunity to roll-up medium-sized food processing and packaging exporters generating revenue of $10 million-to-$20 million which struggle to achieve scale, and while Mercer doesn't have any other acquisitions on the cards, it is open to more.

The company hasn't yet quantified any costs it may face as the result of the collapse of a silo at Fonterra Cooperative Group's Edendale factory, which it designed and built in 2009. The cause of the collapse is being investigated.

The bill has been put at as much as $45 million, although Mercer hasn't yet determined whether it has any liability, or how much would be covered by its professional indemnity and public and products liability insurance.

The shares last traded at 1.5 cents, having dropped 65 per cent this year.