Ruralco sale rumours put Landmark parent on the prowl

Ruralco sale rumours tip Landmark's Canadian parent will buy in

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Ruralco shares are in a stock market trading halt until Thursday pending an announcement

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Farm services business, Ruralco, twice touted in the past six years as likely to take over its arch rivals Elders and Landmark, is itself apparently now the takeover target.

Trading in Ruralco shares on the Australian Securities Exchange halted today as speculation mounted the agency, merchandise, commodity trading and water business was mulling over an approach by Landmark’s giant Canadian parent company, Nutrien.

Ruralco sought a trading halt until Thursday (February 28), pending the release of an announcement to the ASX, which may happen earlier.

Nutrien, formerly Agrium until it merged with fellow Canadian fertiliser heavyweight, Potash Corporation of Saskatchewan, is also a major supplier of crop chemicals and nutrition products in North America and South America.

Industry observers believed Nutrien has made a cash offer, which was all but agreed to by Ruralco, and both companies and their bankers and lawyers were now dealing with the final details.

Having last year reaped a $5.5b windfall from the sale of a Chilean potash-cum-lithium business, Nutrien is cashed up and has previously hinted it could look at further expansion options, including in the Asia-Pacific region.

The $315 million Ruralco business, which includes a significant number of joint venture enterprises with individual agency principals, is a key player in the Australian market, but relatively small beer compared to Nutrien’s operation with a market capitalisation of about $40b.

About 43 per cent of Ruralco's gross profits last financial year were derived from farm inputs and equipment sales, while livestock marketing generated 31pc and  and water supplies and services, including the Total Eden business, represented 22pc.

Ruralco is the parent entity behind the Combined Rural Traders buying group, and also owns some CRT retailers outright. 

The $315 million Ruralco business, which includes a significant number of joint venture enterprises with individual merchandise and selling agency principals, is a key player in the Australian market, but relatively small beer compared to Nutrien’s operation with a market capitalisation of about $40b.

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About 43 per cent of Ruralco's gross profits last financial year were derived from farm inputs and equipment sales, while livestock marketing generated (31pc and  and water supplies and services, including the Total Eden business, represented 22pc.

Nutrien’s Landmark subsidiary has a national network of 300-plus selling agency, merchandise, agronomy, wool marketing and financial services operations.

The Australian business has several times in the past five years been the focus of possible sale speculation, including to Ruralco and the Lempriere wool marketing group.

However it has shrugged off commentary about its value to a crop-centric parent company, enjoying an 18pc or almost $200 million increase in its crop protection and merchandise sales categories alone during the past four years.

Ruralco was also a bidder for Elders in 2013, making an $250m offer to follow up its  2012 purchase of about 12pc of the then beleaguered, debt heavy company’s shares.

The 54 million shares were eventally sold in September 2014 after Elders bankers supported an ultimately successful management plan to push ahead alone with its turnaround strategy.

Once part of AWB Limited, and prior to that, Wesfarmers, Landmark’s origins date back to the Dalgety brand established in the 1840s which was later to become majority owned by British investors before being bought by Wesfarmers in 1992.

It has been part of Agrium (renamed Nutrien early last year) since AWB’s collapse and sell-off in 2010.

Nutrien has about 23,000 staff worldwide.

Ruralco's share price has moved up from $2.95 since mid-January to peak at $3.11 a week ago, but was at $3.06 when trading was halted.

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