With the buyout of Delta Agribusiness it gives Elders a further 68 stores and additional revenue approaching one billion dollars
Elders has turned a 55% decline in profit for the 2023-24 financial year into a resounding result with the takeover of the 68 Delta Ag rural supply stores for a purchase value of $475 million.
And while Elders’ statutory profit dropped to just $45.1 million for the 2023-24 financial year, compared to $100.8 million in 2022-23, there was not so much a reliance on those figures as bankers were excluded from much of the value of the deal.
Instead of going cap in hand to a smiling banker, much of the transaction will be funded by $246 million in fully underwritten pro rata accelerated non-renounceable entitlement offer, and $190 million of new Elders shared issued to Delta shareholders as scrip consideration at $8.52 per share. Bankers will only get to see a share of a $110 million new revolving loan facility being taken out by Elders.
Obvious takeaways from the deal
While the Delta Ag name will be retained, the deal will see Elders come out of the Delta Ag takeover with an additional 68 stores to add to its already 278 strong rural merchandise outlets around the country, giving Elders control of 346 stores to tap at the very fabric of market-leader Nutrien Ag with an approximate 400 stores.
The Senior Management team at Delta Ag will remain the same, and the strong Delta Ag brand will be retained. In the 2023-24 financial year Delta Agribusiness recorded revenue of $835 million and earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $53 million.
Delta Ag obtains its revenue through 68 rural retail stores and 40 independent wholesale customers spread throughout Victoria, NSW, southern Queensland, South Australia and Western Australia.
This deal gives Elders the boost it needs to flip the results from the 2023-24 financial year where sales revenue declined by $190.1 million to $3.131 billion, down from $3.321 billion in the year prior.
Here is the official line at Elders
Elders Limited (ASX: ELD) has entered into an agreement to acquire 100% of the shares in Delta Agribusiness Pty Ltd (Delta) for an enterprise value of $475 million. 1
Established in 2006, Delta is an Australian agribusiness providing a range of products and services through a network of 68 locations and approximately 40 independent wholesale customers.
Delta’s farm inputs business includes crop protection and seeds, animal health products, fertilisers, fuel and general merchandise, as well as an in-house agricultural chemicals and animal health private label brand. Delta also delivers farm advisory services through its team of agronomist and Precision Agriculture specialists.
Delta’s leadership team and operations will remain unchanged in line with Elders’ light touch integration strategy. Both networks will remain operating as they do today, so that customers will continue to experience the same high level of service from both Elders and Delta teams, and the strengths of the respective networks is retained.
Managing Director and CEO of Elders Mark Allison said that the rationale for this transaction between Elders and Delta is strong.
“All decision making at Elders is underpinned by an ambition to provide the best service for our clients and customers and the acquisition of Delta supports that.
“Delta provides us with greater exposure to key local retail markets as well as a market leading agronomy and farm advisory team to complement and extend our products and services range for rural and regional customers, particularly in New South Wales, North West Victoria and South Australia and Western Australia,” Mark Allison added.
“It will also enhance Elders’ existing technical service network and its offering in Ag Tech and precision agriculture, through Delta’s farm advisory business and respected network of specialists.
“Elders has a proven track record of synergy generation through backward integration and anticipates the acquisition will create meaningful value for Elders shareholders,” Mark Allison concluded.
Here is the official line at Delta Ag
Delta management and employees will remain unchanged in line with Elders’ light touch integration strategy. Delta Managing Director and Co-Founder Gerard Hines outlined, “There is strong cultural alignment between Elders and Delta, as two trusted agribusinesses seeking to create value for our customers.
“Our management team will remain unchanged, and we are excited to be able to continue to provide our customers with innovative and value-adding business solutions with the added support of Elders,” Gerard Hines concluded.
Completion of this acquisition is subject to customary conditions and ACCC clearance. This is expected to occur in the first half of the calendar year 2025.
(1) Excluding transaction costs of $21 million and $19 million Delta lease liabilities as at 30 June 2024. The purchase price is subject to typical adjustment mechanisms relating to working capital and debt and debt-like items at completion.
