Ebos' board and managers should hang their heads in shame for cutting retail shareholders out of its discounted capital raising, which clearly wasn't urgent, says outgoing New Zealand Shareholders' Association chair John Hawkins.

The issue dilutes retail shareholders' holdings and shows Ebos' board and managers are "slow learners" for treating retailers so badly, Hawkins says.

"The issue, which was discounted 8 per cent below the market price, was a free gift to a few privileged larger organisations at the expense of many smaller investors who would have their holdings diluted as a result," he says.

The fact that demand was so strong that Ebos increased the amount raised from $150 million to $175m "just adds insult to injury."


Hawkins also took issue with the fact that Ebos had the placement underwritten by arranger UBS New Zealand when the company should have known that demand for new shares would exceed supply.

The underwriting fee, which hasn't been disclosed, "is a further impost on the majority of shareholders who cannot participate," he says.

In announcing the increased amount raised, chair Mark Waller said that was to accommodate strong demand from both existing and new institutional investors in New Zealand, Australia and offshore.

"Our strategy has clearly resonated with investors," Waller says in a statement.

"We look forward to continuing to successfully grow both our healthcare and animal care segments to create further shareholder value."

Following the placement, Ebos' pro-forma net debt-to-ebitda (earnings before interest, tax, depreciation and amortisation) ratio will fall to 1.51 times at December 31 from 2.16 times.

Hawkins criticised Ebos' reason for the issue, saying they show the capital wasn't needed urgently – chief executive John Cullity said the proceeds "provide Ebos with with enhanced financial capacity for further strategic acquisitions and organic growth initiatives to continue the long-term growth of the group."

Ebos had a strong balance sheet before the issue, Hawkins says. "They could have done an accelerated rights issue to achieve the same outcome, which would have treated every investor fairly, but they have deliberately chosen not to."


Hawkins says that Ebos has been a very strong performer and is highly regarded.

"But this is 19th century governance in the 21st century. Ebos should hang their heads in shame. Equally importantly, unfair actions like this do nothing to encourage more people to invest in the sharemarket."

When the placement was announced yesterday, Cullity said Ebos is considering a number of bolt-on acquisitions to both its healthcare and animal care operations, including healthcare consumer brands, medical devices and pharmacy sector expansion.

He said several organic growth opportunities may also require capital, including funding the development of existing brands into new growth markets such as Asia.

The new shares will be allotted on Monday at $19.70 per share, an 8 per cent discount to the $21.42 closing price on NZX on April 29. UBS New Zealand was the sole lead manager and underwriter for the placement.