Flight Centre founders see shareholding drastically diluted
17 April 2020, Written by David Simmons
Flight Centre's (ASX: FLT) proposed $700 million raise was always going to result in a major dilution of ownership for shareholders, but the impact on the company's founders has been severe.
Prior to the raise, which ultimately saw the company issue around 78.1 million new shares at a 27.3 per cent discount, the Flight Centre's founders held 42.21 per cent of voting power altogether.
Despite the founders contributing approximately $20.8 million to the raise, Geoff and Susan Harris, Graham (pictured) and Jude Turner, and Bill James now hold just 25.7 per cent of voting power in the struggling travel company.
For CEO Graham Turner, who personally acquired $10 million of shares issued in the capital raise, this is the first time he has had his shareholding in the company change since November 2011.
The shares were acquired by Harris' investment vehicle Gehar Pty Ltd, with Turner's Gainsdale and James' James Management Services named as the registered holders of securities.
Between the three, Harris now holds the largest number of shares at 16.6 million, while Turner holds 15.7 million and James 13.7 million.
Approximately $562 million was raised under the fully underwritten placement, with a take up of approximately 96 per cent.
A further $138 million will raised as part of the fully underwritten retail component of the entitlement offer.
During the raise Credit Suisse and UBS Group both became substantial shareholders, with the former now holding an 8.3 million shares and voting power of 8.25 per cent and the latter holding 5.6 million shares and voting power of 5.51 per cent.
The capital raise came on the back of significant disruption for Flight Centre which has been impacted by Covid-19 travel restrictions.
The company recently stood down approximately 6,000 staff and closed half of its shops internationally, which will result in annualised savings of $1.9 billion.
This translates to anticipated monthly operating cash costs of approximately $65 million, which will be implemented by the end of July. But one-off costs of $210 million will likely be spent to execute the plan.
"It is - without question - the most challenging period we have encountered in over 30 years in business and it is inevitable that some businesses across our industry will fail, given the significant loss of revenue that they will be experiencing now and for at least the next few months," said Turner.
Shares in Flight Centre are down 1.74 per cent to $10.82 per share at 12:22pm AEST.
Business News Australia
Author: David Simmons