Lark Distilling (ASX:LRK) share price frozen amid acquisition and capital raise

It’s a big day for Lark Distilling, despite its stock being put in the freezer.

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A dollar sign embedded in ice, indicating a share price freeze or trading halt

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The Lark Distilling Co Ltd (ASX: LRK) share price is frozen this morning amid the company’s newly announced capital raise and acquisition.

The company halted trade of its shares this morning, before announcing that it has entered an agreement to acquire Kernke Family Shene Estate Pty Ltd, the owner of the Pontville Distillery and Estate.

Lark Distilling also updated the market on its accelerated export strategy and released its quarterly results this morning.

At the time of writing, the Lark Distilling share price is $5.06, having gained 4.55% on Friday.  

Let’s take a closer look at today’s news from the producer of whiskey, gin, and liquor.

Here’s why the Lark Distilling share price is frozen

The Lark Distilling share price is in the freezer on Monday as it announces its plans to raise approximately $58 million to fund a $40 million acquisition.

The company is acquiring an estate and distillery at Pontville, 30 minutes north of Hobart.

The estate includes 40 acres of land, a 130,000-litre distillery, cellar door, eight bond stores, a working cooperage, and historic stables and homestead.

Pontville will be Lark’s third working distillery in Tasmania, alongside its Cambridge and Bothwell sites. It will increase Lark’s production capacity by around 50% to 576,000 litres each year. Additionally, Lark now expects to have more than 2 million litres of whisky – valued at $435 million – under maturation by 30 June 2022.

Lark will start distilling at Pontville from February 2022. It will open its cellar door from that date.

Additionally, Lark expects to commission a new 1 million litre greenfield distillery on the Pontville site in 2023.

All whisky distilling, product innovation and development will continue to be led by Lark’s Master Distiller, Chris Thomson, and his team.

To pay for the acquisition, Lark is undertaking a $46.5 million institutional placement and a share purchase plan worth up to $5 million.

Further, the company’s directors plan to put $6.4 million towards the capital raise via a conditional placement. The conditional placement is subject to shareholder approval.

The placements will see 10.6 million new Lark Distilling shares offered for $5 apiece. That represents a 1.2% discount on Lark’s previous closing price and around 16.8% of its issued capital.

The share purchase plan will also see new shares in the company offered for $5 each.

Lark is also planning to export its products from 2023. It expects the global whiskey market to grow by 8% each year until 2025.

Commentary from management

Lark Distilling’s managing director, Geoff Bainbridge, commented on the news driving the company’s share price today, saying:

These assets provide significant whisky inventories on value accretive terms and re-balance the maturity profile of our overall whisky under maturation. Critically, the age profile and quality of the whisky under maturation being acquired will enable The House of Lark to commence an export programme from [financial year 2023] which is approximately 12 months ahead of previously published plans.

Quarterly results

Lark Distilling also released its results for the first quarter of financial year 2022 this morning.

Over the quarter just been, the Lark Distilling share price gained 50%.

Financially, the quarter also looks to have been strong despite COVID-19 impacts.

Lark Distilling brought in $4.1 million from sales over the 3 months ended 30 September. That’s 80% more than it did in the first quarter of financial year 2021.

However, it’s $451,000 less than it did in the fourth quarter of financial year 2021. The company attributed the dip in sales to COVID-19-related border closures.

The company expects its trade will continue to be impacted by COVID-19 until December when vaccination rates in Tasmania are forecast to reach 90%. As a result, Lark has pushed back the opening of its new whiskey bar, The Still, until then.

Additionally, the net sales value of the company’s Whisky Bank at Maturation was $267 million as of 30 September, up from $236 million as of the end of last quarter.

During the quarter, Lark Distilling was crowned a finalist for the IWSC Worldwide Whisky Producer of the Year 2021. The company’s Forty Spotted Gin also received multiple awards at the Spirits Business Gin Masters.

Lark Distilling share price snapshot

This year has been good to the Lark Distilling share price.

It has gained 251% since the start of 2021. It is also 274% higher than it was this time last year.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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