Johannesburg — BUILDING hardware manufacturer and distributor Dawn Group plans to raise R300m through a rights offer this month to strengthen its balance sheet and reduce bank debt.

The group said on Friday in order to maintain its black economic empowerment status throughout the period of acquisitive growth, it chose to fund all acquisitions and the consequential growth in working capital from internally generated cash and bank borrowings. Dawn joins the growing list of listed firms tapping shareholders and the market for funding.

Recently, York Timbers announced it would raise R500m also to strengthen its balance sheet, while junior foods firm Sovereign Foods is asking shareholders to raise more than R144m to pay debt and fund capital projects. During the past seven years, Dawn embarked on acquiring various businesses with strong brands which strategically complemented its core business.

The group said that as a result of the financial crisis and economic recession, the board had decided that the prudent approach would be to strengthen its balance sheet through the raising of additional capital and the reduction of bank debt.

"The board evaluated funding options available to it and concluded that the rights offer was the most appropriate funding mechanism for the group at this time and that it would have the least dilutive effect to the our black economic empowerment status," the company said in a regulatory filing on Friday.

In terms of the rights offer, the group would offer a total of 41666666 ordinary shares for subscription to qualifying shareholders, by way of renounceable rights, at a subscription price of 720c per ordinary share.

Dawn said this would be on the basis of 20,98270 rights offer shares for every 100 ordinary shares held at the close of trade on the record date of the offer.

The group said only whole numbers of new shares would be issued and shareholders would be entitled to rounded numbers of shares once the ratio had been applied.

Dawn shareholders would not be permitted to apply for new shares in excess of their entitlement. The rights offer was fully underwritten by Coronation Asset Management.