Elders confident of winning over ACCC in $475m Delta Agribusiness deal
Elders boss Mark Allison has conceded the company may need to sell off branches in order to win over the ACCC as it bids to take over rural supplies group Delta Agribusiness.
Elders boss Mark Allison has conceded the company may be required to sell off branches in order to win over the competition watchdog for its bid to take over rural supplies group Delta Agribusiness.
Elders announced on Monday it had agreed a deal to pay $475m for Delta, which sells rural products and services through a network of 68 sites across NSW, Queensland, Victoria, Western Australia and South Australia and via 40 independent wholesale customers.
Fielding questions from analysts about any competition concerns the ACCC might hold, Mr Allison said Elders was willing to work with the regulator to get the deal over the line.
“We’ve done a lot of pre-work in assessing against their criteria where there may be concerns,” he said. “They’ll do their consultation … but if the outcomes of these are divestments of branches, or whatever it happens to be, that’s doable given that it’s at a materiality level that’s acceptable for the Elders board.
“Our desire is that there’s no overlap issue. From our viewpoint, and from the experience with AIRR, and with Ruralco and Landmark when they came together, understanding the off-patent generic component of inputs, and how open it is where a farmer anywhere can have products delivered directly – it’s not like a consumer competition issue. It’s more of an industrial input equation.
“But we feel comfortable the ACCC, from their previous experience, will be aware of the idiosyncrasies of the rural products market – we’re confident the right decision will be made.”
Part of the proceeds from a $246m entitlement offer to shareholders will go towards the cash component of the acquisition, which will also be funded by a $110m loan and $190m of new Elders shares issued to Delta’s 150-odd shareholders at $8.52 per share.
Delta, whose rural products include crop protection, seeds, animal health products, fertilisers, fuel and general merchandise, generated $835m in revenue in the year to June, and EBITDA of $53m.
Elders expects the deal to be completed in the first half of calendar 2025, and says it has the potential to generate annual EBITDA synergies of $12m.
In a note to clients, City analyst William Park described it as a “highly complementary and accretive acquisition”, and said an ACCC decision could be made before Elders hands down its interim results.
The announcement came as Elders reported a disappointing set of results for the 12 months to September 30, including a big drop in profit, which failed to meet consensus expectations.
Statutory net profit came in at $45.1m, down 55.8 per cent on the previous year, on a 6 per cent fall in revenue to $3.13bn. Underlying profit of $64m was down 38 per cent on 2022-23, and missed analyst expectations of $67m.
Elders said the first quarter of the year had been hit by low livestock prices, lower crop protection margins and subdued client sentiment, but improving conditions over the course of the year had continued into October and November, which traded “in line with expectations and forecasts for a normalised first quarter”.
On the outlook for FY25, Elders said it was optimistic about the 2024 summer crop and expects a gradual improvement in its rural products margin, assuming continued stability in crop protection prices following the volatility of 2022-23.
It also expects price stability in livestock markets, but said volumes may be affected by dry conditions in South Australia and Victoria in 2023-24.
In the company’s annual report, it was revealed that Mr Allison had agreed to stay on as chief executive until at least September 2026 as the board continues its search for his replacement.
Elders received a first strike against its remuneration report at last year’s annual meeting following concerns with his $1.5m salary, $1m in bonuses and additional services rights that were promised to Mr Allison in order to retain him after he’d previously indicated a desire to step down at the end of 2023.
Elders is due to hold its annual meeting on December 19.
The company will pay a final dividend of 18c on January 24, taking its total payout to 36c per share.
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