With Canadian group, Nutrien trying its own bit of rationalisation in the rural sector, (and running into problems with the ACCC), Elders has joined the party with a $157 million cash and shares offer for the unlisted private wholesale buying group Australian Independent Rural Retailers (AIRR).
Elders said on Monday that it had entered a scheme of implementation to acquire all of AIRR’s shares, with the half-scrip, half-cash bid already receiving the blessing of the target’s board.
Elders said it was funding the acquisition through a $137 million equity raising and the issue of $79 million of new Elders shares to AIRR shareholders as scrip consideration.
The $10.85 per share deal values AIRR at $157 million on an equity basis and $187 million on an enterprise value basis (which includes debt).
Elders said the acquisition will allow it to enter the wholesale rural services market with net synergies of $6.6 million to $9.33 million per annum to be gradually realised over the next two years.
The deal is Elders attempt to bulk up against the possible merged combination of Nutrien and Ruralco.
Elders said the proposed bid offs a “Compelling strategic rationale by providing entry to the wholesale rural services market which enables a new growth channel and is consistent with Elders’ Corporate Acquisition Principles”.
Nutiren has an agreed $469 million offer on the table for Ruralco, but the ACCC reckons there is competition in some areas.
“A merged Landmark-Ruralco would be by far the largest retail and wholesale supplier of rural merchandise in Australia, with Elders the only other large national chain,” ACCC Deputy Chair Mick Keogh said in a statement issued on June 13.
“The combined entity would supply around 650 rural merchandise stores (including both corporate and member stores), which is approximately 45 percent of all rural merchandise stores nationally.”
“We are seeking submissions in response to our statement of issues, and will continue examining what impact the loss of a major national retail competitor might have on prices, product range (including private label brands) and other areas of competition,” Mr. Keogh said.
A final decision is due around August 15, the ACCC said in last months statement.
In its statement, yesterday Elders gave some background as to what AIRR offers.
“Established in 2006, AIRR is a member-based buying and marketing group for independent rural merchandise and pet and produce stores. The business is a national wholesale platform supported by a network of eight warehouses servicing more than 1,500 customers.
“AIRR has approximately 240 independent member stores and an additional 100 Tuckers Pet & Produce stores located across Australia. AIRR also owns and operates 5 retail locations in Victoria.
“AIRR provides its customers access to more than 6,000 products (SKUs) from more than 650 suppliers. Among the products offered by AIRR are two private label ranges: Apparent, a range of agricultural chemicals and Independents Own, a range of animal health, feed, and general merchandise products.
“In September 2018, AIRR acquired The Hunter River Company which has a portfolio of over 50 animal health product Australian Pesticides and Veterinary Medicines Authority registrations.: Elders said.
Elders said that AIRR is expected to generate earnings before interest tax depreciation and amortisation of $21.9 million for the twelve months to September 2019.
Elders shares were halted yesterday at Friday’s close of $6.13.
