Lark Distilling's Strategic Partnership with Seppeltsfield Wines and $22.5 Million Equity Raising
LRK (LRK) Share Update July 2024 Monday 29th
Lark Distilling Announces Strategic Partnership and Equity Raising
Lark Distilling Co. (ASX: LRK) has announced a significant strategic partnership with Seppeltsfield Wines and an equity raising initiative totaling approximately $22.5 million.
Instant Summary:
- Lark enters into a strategic partnership with Seppeltsfield Wines.
- Approximately $22.5 million equity raising announced.
- Exclusive access to premium oak barrels secured.
- Conditional placement of $15.0 million at $0.85 per share.
- Institutional placement to raise $6.5 million.
- Non-underwritten share purchase plan aiming to raise up to $1.0 million.
- Funds to be used for brand investment, facility upgrades, and export strategy.
Strategic Partnership with Seppeltsfield Wines
Lark Distilling Co. has entered into a Heads of Agreement with Seppeltsfield Wines Pty Limited, marking a strategic partnership that will provide Lark with secure and exclusive access to premium oak barrels. This partnership is expected to significantly enhance Lark's whisky maturation process, ensuring a consistent supply of high-quality barrels essential for producing premium whisky.
The partnership includes a 10-year agreement with an option for a 10-year extension, granting Lark exclusivity over selected fortified barrels and first right of refusal on others. This exclusivity is crucial as over 60% of the final whisky product's character is influenced by the interaction with the casks.
Equity Raising Details
To support its growth strategy, Lark is undertaking an equity raising initiative totaling approximately $22.5 million. This includes a $15.0 million conditional placement at $0.85 per share to Seppeltsfield Wines Pty Ltd and other investors, subject to shareholder approval. Additionally, an unconditional institutional placement will raise $6.5 million, and a share purchase plan aims to raise up to $1.0 million.
The proceeds from the equity raising will be used to invest in Lark's brand and facilities, driving the export strategy and accelerating growth. This includes further development of the Pontville site, enhancing production and storage capacity, and improving the cellar door experience in Hobart.
Financial Outlook
Based on preliminary and unaudited management accounts, Lark's FY24 results are expected to show net sales of $14.0 million, operating EBITDA of $(2.8) million, and a gross margin of approximately 68%. The equity raising will provide Lark with the financial flexibility needed to invest in its brand and facilities, ensuring positive operating cashflows by FY27.
Timetable
The key dates for the equity raising and strategic partnership include:
- Record date for SPP: 26 July 2024
- Trading halt and announcement: 29 July 2024
- Placement bookbuild: 29 July 2024
- SPP offer opens: 5 August 2024
- SPP offer closes: 20 August 2024
- EGM to approve Conditional Placement: Late August/Early September 2024
The strategic partnership with Seppeltsfield Wines is expected to provide Lark Distilling with a competitive advantage in the premium whisky market. The secure access to high-quality barrels will enhance the quality and consistency of Lark's products, potentially boosting brand reputation and market share.
The equity raising will strengthen Lark's balance sheet, providing the necessary funds to invest in brand development, facility upgrades, and expansion into new markets. This financial stability is likely to improve investor confidence and support long-term growth.
Investor Reaction:
Analysts and investors have reacted positively to the announcement, highlighting the strategic partnership's potential to enhance Lark's product quality and market position. The equity raising is seen as a proactive step to secure the company's financial future and support its growth ambitions.
Conclusion:
Investors should closely monitor Lark Distilling's progress with the strategic partnership and equity raising initiatives. These strategic moves are expected to drive growth and enhance shareholder value. Participation in the equity raising and support for the Conditional Placement at the upcoming EGM could be beneficial for long-term investors.