Funtastic Limited, owner of distributor Madman Entertainment, is undertaking a capital raising of up to $24.6 million in the coming weeks.
According to Funtastic documents, some of the cash will help Madman further push into digital distribution in its specialist areas of Australian and world cinema, kids’ content, Anime and sport.
Funtastic is principally a distributor of toys and related products in Australia, including such brands as Ben 10 and The Wiggles. It also owns a toy manufacturing business in Hong Kong.
The overall plan is to use $15 million of the money raised to immediately repay the parent company’s debt, which will strengthen the balance sheet. This will allow for increased flexibility to invest in key brands and drive growth, increased liquidity, the recommencement of fully franked dividends and the potential for more attractive lending terms on its remaining bank facilities.
The company expects earnings to be between $23 million and $25 million in 2013, before interest, tax, depreciation and amortization, up from this year's expected $20.1 million.
It is assumed there will be no improvement to current Australian retail conditions “which are expected to remain challenging for the foreseeable future”, no major change in the domestic customer landscape and a continuing reliance on existing foreign exchange hedging policy.
The company recently returned to profit and improved operations by, in part, reducing the number of divisions from 22 to three, selling businesses, and reducing staff numbers, brands and suppliers.
The offer price of $0.145 per share for existing and new shareholders is via a placement and accelerated non-renounceable entitlement offer. The institutional entitlement offer opened to eligible investors on June 21 and the retail entitlement offer is open from June 29 to July 25. Bell Potter Securities Limited is acting as sole lead manager to the offer.
Ten Network chair Lachlan Murdoch is one of Funtastic’s largest shareholders.
Madman last month announced that it had become an official content aggregator with iTunes, able to offer management and distribution services to third party producers. It said it was the first company with aggregator status and an existing commercial distribution business.