Elders Limited's Strategic Acquisition of Delta Agribusiness and Equity Raising
ELD (ELD) Share Update November 2024 Sunday 17th
Elders Limited Announces Acquisition of Delta Agribusiness and Equity Raising
Elders Limited (ASX:ELD) has made a significant move to acquire Delta Agribusiness Pty Ltd, coupled with a substantial equity raising to support this strategic expansion.
Instant Summary:
- Elders acquires Delta Agribusiness for $475 million.
- Equity raising of $246 million through a 1 for 5.05 entitlement offer.
- Acquisition expected to generate $12 million in annual EBITDA synergies.
Acquisition Overview
Elders Limited has entered into an agreement to acquire 100% of Delta Agribusiness Pty Ltd for an enterprise value of $475 million. This acquisition is part of Elders' strategy to enhance its offerings in rural products and digital services. Delta's business model complements Elders, strengthening its presence in key geographic regions.
Equity Raising Details
To fund the acquisition, Elders is conducting a fully underwritten $246 million equity raising. This will be achieved through a 1 for 5.05 pro rata accelerated non-renounceable entitlement offer of new shares. The offer price is set at $7.85 per new share, representing a discount to the theoretical ex-rights price (TERP).
Strategic Rationale
The acquisition aligns with Elders' core strategy of growth through disciplined acquisitions. It is expected to deliver mid single-digit EPS accretion pre-synergies and mid-teens EPS accretion post-synergies. The combination of Elders and Delta is anticipated to generate $12 million in annual net EBITDA synergies over three years.
Impact on Elders
Delta's integration will enhance Elders' technical expertise, particularly in ag tech and precision agriculture. The acquisition will also fill retail gaps in New South Wales, Victoria, South Australia, and Western Australia, providing a platform for backward integration.
The acquisition of Delta Agribusiness is a strategic move that could significantly enhance Elders' market position and service offerings. The expected synergies and geographic expansion are likely to positively impact Elders' financial performance. However, the success of the integration and realization of synergies will be critical to achieving the projected benefits.
Investor Reaction:
Analysts are likely to view the acquisition positively, given the strategic fit and potential for synergies. However, the success of the equity raising and integration process will be closely watched by investors.
Conclusion:
Investors should consider the long-term strategic benefits of the acquisition and monitor the progress of the equity raising and integration efforts. Elders' ability to execute its strategy effectively will be key to maintaining investor confidence.