The bulk of funds raised will come through a three-for-seven share entitlement offer at a price of $13.50 per share with Wesfarmers saying the institutional component of the offer is fully underwritten to raise around $1.9 billion.
Under the entitlement offer Wesfarmers will issue three new ordinary shares for every seven existing Wesfarmers shares held by 7pm on January 28.
At $13.50, Wesfarmers said the price represented a 17.3% discount to yesterday’s closing price but added that the new shares issued under the offer would not be entitled to the interim dividend for the 2009 financial year.
Banks involved in the institutional component of the offer include ABN Amro, Deutsche Bank, Goldman Sachs JBWere, JPMorgan, Macquarie Capital Advisers and UBS which have been appointed joint lead managers.
Other shareholders can also participate in the not underwritten retail component of the entitlement offer on the same terms with Wesfarmers expecting a 15% take-up which would generate some $400 million.
In dividend guidance, Wesfarmers said the full-year dividend was not expected to be greater than $1, half of an earlier $2 forecast.
To make up the rest of the $2.8 billion target, Wesfarmers said additional proceeds of $900 million would be raised via placements to mutual funds at $14.25 per share with $500 million to those managed by Capital Research Global Investors and $400 million to funds managed by Colonial First State.
Having some $A9.7 billion of total drawn debt at the end of 2008, Wesfarmers said that $2.9 billion raised would cut debt to $6.9 billion, excluding cash held on deposit of around $A400,000 by the end of last year.
The company said $300,000 of the $1.1 billion of drawn down debt from its financing facilities maturing in December would be retired from the proceeds of the equity raising by June 30, while another $400,000 of debt will be extended to December 2011.
Wesfarmers aims to pay off the rest of the remaining $400,000 out of existing facilities or operating cash flows.
The trading halt of Wesfarmers will be lifted on January 27.
Meanwhile, yesterday the company revealed some recent drops in production from September but overall the figures indicate solid growth for last year.
At the company’s Curragh coal mine in Queensland’s Bowen Basin output of metallurgical coal for the December quarter totalled 1.76 million tonnes, an 8% jump year on year (YoY), and the total 2008 production of 7.27Mt was 14.1% higher than in 2007.
For thermal coal, the December quarter production of 737,000t was 17.7% higher YoY and the total 2008 output of 2.65Mt was 5.8% higher than the previous year.
Despite these figures, metallurgical coal production was down 2.9% from the 2008 September quarter while thermal coal was down 4.8%, with Wesfarmers saying the former was the result of changes to the mining sequence and product mix while the latter was in line with contractual requirements.
Wesfarmers added the feasibility study to ramp up the mine to 8-8.5Mtpa of metallurgical coal exports was continuing.
At the Bengalla open cut mine in New South Wales’ Hunter Valley, operated by Rio Tinto Coal Australia, 40% stakeholder Wesfarmers reported December quarter thermal coal production of 560,000t, a minor rise of 1.8% YoY, and the 2008 total output of 2.14Mt was 3.9% higher than 2007 results.
A feasibility study to increase ROM production from 8.7Mtpa to 10.7Mtpa remains underway.
Meanwhile, Wesfarmers’ wholly owned Premier open cut coal mine, near Collie in Western Australia, had December quarter production of 845,000t, a 50.9% jump YoY, and total 2008 output of 3.23Mt was 22% higher than in 2007.
However, Wesfarmers said the 9.9% drop from the 2008 September quarter reflected lower demand from Verve Energy, primarily due to a scheduled major upgrade to the Muja power station.
Wesfarmers, which has a market capitalisation of around $A10.77 billion, used finance to help secure the $A18 billion takeover of Australian supermarket chain and retail giant Coles Group in 2007.