Letter sent to Metcash IR chief Steve Ashe re SPP

March 18, 2024

Below is the text of an email sent to Metcash Investor Relations chief Steve Ashe late on February 28, 2024 lobbying for an expansion of its $25 million share purchase plan, which closed on March 1. The announcement delivered an increase to $60 million after $153 million in applications were received and a minimum allocation of $1000. All up, not a bad outcome.

Hi Steve,

Hope all is well at Metcash.

I was wondering if you could please forward this email to all relevant Metcash decision makers on the forthcoming SPP allocation decision and outcome announcement.

Firstly, I should say at the outset that it would have been better if this raising was done as a PAITREO that treated all shareholders equally.

Instead, you went with the placement-SPP model and unfortunately, the proposed SPP component is too small at just 7.7% or $25 million of $325 million.

Given that Metcash has around 30,000 shareholders, the theoretical maximum in SPP applications is $900 million. So, if just 2.8% of the total shareholder base apply for the maximum 30k, that will soak up the entire $25 million.

As a rule of thumb, every SPP should anticipate at least 10% participation and the placement-SPP split should reflect the situation before the raising was announced, in order to prevent any dilution between the classes.

If retail shareholders owned 25% of Metcash before the raising then the SPP should be 25% of the capital raising which would be $100 million out of $400 million.

It would be great if Metcash was to join this list of almost 50 examples of companies which completely uncapped their SPP in the face of strong demand and in order to avoid imposing any form of scale back.

In terms of the upper limit of such a move, you could go to $300 million and match the size of the placement. This would lift the overall raising to $600 million, which would only marginally exceed the $558 million spend on acquisitions.

The other alternative is partially lifting the cap but still imposing a scale back, as has been done previously by this long list of companies.

If there is going to be a scale back, there should be a minimum allocation such as 200 shares for all applicants, in order to reduce the number of holders with an unmarketable parcel.

After that, I would suggest a pro rata allocation based on size of holding. Alternatively, you could favour your smaller and poorer retail shareholders by scaling back based on size of application like the companies on this list.

Whatever you do, please spell out the scale back formula clearly in the SPP outcome announcement, preferably with a table similar to what QBE produced in this 2009 announcement.

Finally, in terms of the outcome announcement, please follow the best practice demonstrated by companies on this list. For the avoidance of doubt, here are some words to demonstrate how it might read.

“The Metcash SPP was open to 30,945 eligible shareholder and the company received applications totalling $103.5 million from 11,256 holders.”

I would appreciate confirmation that this email has been received and forwarded to the relevant parties and look forward to seeing the outcome of the SPP announced to the ASX next week.

Thank you for your consideration.

Kind regards

Stephen Mayne
Owner of 10 Metcash shares
Shareholder Advocate