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Infant formula company Wattle Health to remain suspended after failed rights issue

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The Wattle Health Australia Limited (ASX: WHA) share price will remain in its voluntary suspension for the foreseeable future following an update on Thursday.

What did Wattle Health announce?

This morning the infant formula and baby food company provided the market with an update on its rights issue and proposed acquisition of CNCA accredited manufacturing facility, Blend and Pack.

Blend and Pack is the largest (by volume) independent, nutritional dairy processing and packaging business in Australia. It was also one of the first Australian manufacturers to obtain Certification and Accreditation Administration of People’s Republic of China (CNCA).

And in January 2019, the company successfully renewed its CNCA accreditation for a further 4-year period.

Wattle Health has been trying to raise funds to acquire a majority interest in Blend and Pack since February of last year.

However, several attempts to raise funds have failed, leading to significant delays in closing the transaction.

Wattle Health hits another brick wall.

Wattle Health’s most recent attempt to raise funds was through a rights issue.

It was aiming to raise a total of $55 million to fund the transaction, but failed miserably once again.

According to today’s release, Wattle Health received a total of ~$11.7 million from existing eligible shareholders. This meant a total shortfall amount of $50.6 million.

And although the rights issue was partially underwritten for $20 million and it was in discussions with a number of interested parties for the shortfall funding, the company was unable to secure the $55 million required as the minimum offer amount under its prospectus.

As a result, the underwriting agreement with Claymore Capital lapsed on December 31.

What now?

Wattle Health advised that Mason Financial Holdings has agreed to extend the “sunset date” of the proposed transaction to January 7.

This will allow both parties to further negotiate on a potential amended proposal following the failure of the rights issue offer. However, management warned that there is no guarantee that a new agreement will be reached with Mason. Its shares will remain suspended pending a further update on the transaction.

This news appears to have gone down well with the shareholders of infant formula rivals Bubs Australia Ltd (ASX: BUB) and Nuchev Ltd (ASX: NUC). They are both up over 1% in early trade.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BUBS AUST FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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