Synlait Milk's capital raising completes a successful trifecta for the dairy processor.
The placement follows the resolution last week of a long-running legal dispute and the signing of a large customer for its new plant at Pokeno.
The addition of the as yet unnamed client goes a long way towards resolving Synlait's key issue - its over-reliance on a2 Milk.
News that Synlait had settled a land covenant dispute, also centring on its Pokeno factory site, saw the share price rally sharply last week.
Canterbury-based Synlait said the placement was strongly supported, attracting bids well over the $180m sought. A $20m share purchase plan will follow.
Synlait was put on a trading halt while placement took place.
When trade resumed today, the stock rallied by 18c to $5.58, and well above its placement offer price of $5.10.
The capital raise strengthens Synlait's balance sheet and paves the way for a $70m investment processing and packaging equipment to service its new, multinational customer.
"The announcement last week [of a new customer] went a big way towards solving their strategic problem, which was an over-reliance on a2 Milk, who will remain a sizeable customer for the foreseeable future," Craigs Investment Partners analyst Stephen Ridgewell said.
He said a capital raise had been on the cards since early in the year, when it was becoming clear that Synlait was getting caught in a2 Milk's downdraft as that company encountered problems in the unofficial Australia-China daigou channel.
Ridgewell expected to see more "bolt-on" deals from Synlait.
"It's going a long way towards solving that over-capacity issue, which has become more apparent as a2 Milk made it clear that they wanted to diversify their supply arrangements away from Synlait," Ridgewell said.
Chief executive Leon Clement said he was pleased to see the three key issues resolved.
"They are all material developments in our evolution but I don't think it's the end of the story," he told the Herald.
He said the new customer would go a long way towards "filling" Synlait's new Pokeno factory.
"Having said that, we have a strong milk pool there and we will continue to leverage that for infant based powders.
"It is a material step forward for us and we are very excited to bring a significant multi-national customer to our portfolio and we see it as a strong and enduring strategic partnership."
Nutritional products made for the new customer would include some plant-based product, he said.
"We built Pokeno with the intention of putting a significant customer in there who would add value to us."
Clement said the addition of a new customer would help Synlait diversify away from main customer and 20 per cent shareholder, a2 Milk.
Both Synlait and a2 Milk have making moves to be come less reliant on each other.
To that end, a2 milk is in the process of buying Mataura Valley Milk for $270m, enabling it to make it own infant formula.
While the two are undertaking their own separate initiatives, they remain friends.
"We have both been the victims of our own success," Clement said.
"It is a wonderful story this partnership and it remains the backbone of our organisation.
"We are both really important and reliant on each other."
Forsyth Barr analyst Chelsea Leadbetter said Synlait had provided a lot for the market to digest over the last week or so.
She said the announcements had helped to "de-risk" the investment case and resolved some of the brokers' questions and concerns.
However, she said there remained a number of unknowns.
"The pathway to higher returns is becoming clearer after Synlait's expansionary capex phase, albeit, execution on targets and market expectations is key."
Leadbetter noted that Synlait's guidance is now for net profit "at or slightly below" 2020 levels compared with prior indications of a "similar or slight improvement".
She noted that key customer, a2 Milk, was experiencing material headwinds through the daigou channel, which is flowing through to Synlait.
However, she saw this as a temporary issue and expected a return to growth in finished infant formula the second half of 2021, when inventory levels and demand normalises.