Rural services group Elders is set to acquire private rival Delta Agribusiness following the company entering a trading halt on Monday (Sunday GMT) to help fund the deal with an institutional equity raising.
Australia’s largest agribusiness said the bid is worth A$475 million (US$308 million) and will fill key geographical gaps in retail markets across Australia by enhancing the company’s offerings in ag tech and precision agriculture.
The deal includes $190 million new shares for Delta shareholders, totalling 10.5% ownership of Elders; a capital raise of $246 million at $7.85 per share - representing a 9.2% discount to the last closing of trade of $8.65 per share; and a new $110 million loan facility.
Delta is known for its rural products and advisory services and generated $835 million in revenue last year. The company has a network of 68 locations and 40 independent wholesaler customers with its offerings ranging from fertilisers to seeds and its 4 Season animal health brand.
Elders claims the deal is expected to generate annual net EBITDA synergies of approximately $12 million, predominantly achieved through proven backward integration.
Chief Executive Mark Allison said: “The acquisition of Delta continues Elders' successful track record of growing our business through disciplined acquisitions. Delta provides us with greater exposure to key local retail markets as well as a leading agronomy and farm advisory team to complement and extend our products and services range for rural and regional Australia.”
The bid announcement coincided with Elders’ financial year 2024 results which saw the company post a 55% year-on-year drop in statutory profit to $45 million and a 6% decline in sales revenue at $3.13 billion from the prior year.
Elders declared a final dividend of 18.0 cents per share at 70% franked, making the full-year dividend payout of 40.7 cents per share at 60% franked, falling 22% from the prior year.
The acquisition is expected to be completed in the first half of the 2025 calendar year, granted regulatory approval. Elders will commence trading Tuesday 18 November following the completion of the institutional placement, with the retail offer opening on 25 November 2024 and closing on Monday, 9 December 2024.
As of Friday 15 November close (AEDT), Elders (ELD: ASX) stock closed at $8.65 up 0.58%. Elders' market cap stands at $1.37 billion.