Seven Group Holdings Ltd (ASX: SVW) shares entered into a trading halt today after the company announced a $500 million capital raising. At Friday's close, the Seven share price was changing hands at $23.43.
The company has advised its shares are expected to remain in a trading halt until Wednesday 21 April or until an announcement regarding the capital raise.
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Why the Seven Group share price will be one to watch
The Seven share price will be in focus when it resumes trading. This comes following the group's announcement it is pursuing a $500 million capital raising via an institutional placement and share purchase plan. The reasons provided by Seven for the capital raising are to allow for greater balance sheet flexibility and reduce the company's net debt position to support portfolio growth opportunities across key verticals.
Seven will be using proceeds of the cap raise to reduce overall debt from $2.6 billion to $2.1 billion, facilitating the retirement of more costly facilities that bear interest rates of 5.60%.
The new shares will be issued at $22.50 per share, a 4.0% discount to its closing price of $23.43 on 16 April.
It will be interesting to see whether or not the small discount will affect the Seven Group share price when it resumes trading on Wednesday.
Seven Group overview
Investors often immediately think of Chanel Seven or Seven West Media Ltd (ASX: SWM) when thinking about Seven Group shares. Seven Group owns 40% of Seven West Media, alongside a number of businesses in the industrial and energy sectors.
The company owns 100% of WestTrac, a leading Caterpillar dealer which supports Australia's rich iron ore and thermal coal regions. WestTrac's key customers include ASX iron ore majors BHP Group Ltd (ASX: BHP), Fortescue Metals Group Limited (ASX: FMG) and Rio Tinto Limited (ASX: RIO). WestTrac delivered an 8% increase in 1H21 revenues to $1,847 million, contributing a significant 78% of the group's total revenues.
Seven Group also owns 100% of Coats Hire, the largest nationwide industrial and general equipment hire company. Social distancing and prolonged lockdowns in Victoria impacted construction activity across the east coast, largely driving a 6% decline in 1H21 revenues to $469 million.
Seven maintains a 23% shareholding of Boral Limited (ASX: BLD), an international building products and construction materials company. Boral recently received an overweight rating from Morgan Stanley after the company completed the sale of its joint venture business for US$1.05 billion. Seven believes there is a strong five-year infrastructure investment growth outlook, with Boral poised to capture demand.
What also makes Seven an interesting conglomerate is its 28.5% ownership of Beach Energy Ltd (ASX: BPT). Lower oil prices saw Beach Energy's revenue fall 22% in the first half. Seven has highlighted that OPEC+ supply uncertainty will continue to subdue oil prices as demand recovery ramps up.
The Seven Group share price has had a flat year-to-date performance but has more than doubled since its March 2020 lows. Its shares are currently not too far off their February all-time record highs of $24.25.
