New Zealand Rural Land Company (NZL) is tapping shareholders for $20.4 million to fund the acquisition of two dairy farms in Southland.

The company is raising the capital through a rights offer, meaning eligible shareholders would have the right to purchase 1 new share for every 5 shares they own.

The proceeds would help fund NZL's acquisition of the Argyle Downs Farm (546ha) and Greenhill Farm (366ha) in Southland.

They would have new tenants with initial terms of 11 years and 10 years respectively and would include consumer price index-linked rent reviews.

"The acquisitions represent a continuation of NZL's strategy of broadening its portfolio of high-quality rural land assets which, following the acquisitions, will comprise approximately 11,710 hectares of dairy farms across Canterbury, Central Otago, and Southland,' NZL chair Rob Campbell said.

"These assets are all underpinned by triple net leases with CPI-linked rental adjustments, resulting in NZL being well positioned in an inflationary environment."

The shares would be offered at $1.05 each which represents a 6.3 percent discount on the last traded price and is a 5.3 percent discount on the theoretical ex-rights price (TERP) of $1.11.

TERP is the market price a share would theoretically have following a rights issue.

The offer would be opened to large institutional investors on Wednesday, then retail investors would be able to take part from 13 June.

Any rights not taken up in the offer would be auctioned off to both retail and institutional investors.

The company said following discussions with its valuers, it expected the total value of its portfolio would see a gain of between 7.5 percent and 9.5 percent for the year ending June.

It recently said it saw a silver lining in rising interest rates, with the short-term pain likely to lead to long-term benefits.

Republished by Arrangement