Elders raising $137m to help buy ag supplies network, AIRR

Elders to buy AIRR's independent ag supplies network


Elders will pay $10.85 a share, via a mix of scrip half cash to buy Australian Independent Rural Retailers


The rush is on to grab extra market share in the farm services sector, with Elders now set to buy the Australian Independent Rural Retailers network.

The move, involving a $137 million capital raising to help fund the acquisition, comes as Elders' major rival Landmark enters the final leg of its takeover bid for Ruralco.

Elders will pay $10.85 a share, in a mix of half scrip and half cash, for 100 per cent of AIRR - a 13 year-old network of about 240 independent member rural merchandise stores around Australia.

The northern Victorian-based group also owns five of its own retail sites in Victoria.

It also has a further 100 member stores trading as Tuckers Pet and Produce located Australia-wide.

AIRR members have been assured their group's current management and independent identity will be retained through the "light touch integration" with Elders, Australia's second biggest player in the agricultural selling agency and retail services marketplace.

Last year AIRR bought the The Hunter River Company which has a portfolio of more than 50 animal health products registered with the Australian Pesticides and Veterinary Medicines Authority.

We look forward to further enhancing AIRR's offering to its diverse customer base and continuing to grow the business together - Mark Allison, Elders

Headquartered in Shepparton, the group also has its own private label farm chemical range sold under the Apparent brand and the Independents Own animal health, feed and general merchandise products line.

AIRR is currently on track to generate earnings before interest tax depreciation and amortisation of about $23m in the year to September.

"Acquiring AIRR will give Elders a national wholesale platform," said Elders managing director, Mark Allison.

AIRR had potential to deliver synergies worth up to $9.3m a year as the group's activities were absorbed into the Elders network in the next two years.

"At the same time, by preserving continuing of AIRR's key management team and independent identity through a light touch integration, AIRR will continue to deliver the benefits to its independent members which have enabled it to achieve a track record of consistent growth," Mr Allison said.

"We look forward to further enhancing AIRR's offering to its diverse customer base and continuing to grow the business together."

Mark Allison

Mark Allison

Elders' offer is worth $10.85 a share to network members - a 27pc price premium on AIRR's average share value in the past two months.

The takeover has been unanimously supported by AIRR's board.

AIRR managing director, Peter Law, believed partnering with Elders would benefit farmers and customers.

He said the group was already a recognised leader in the wholesale market.

Our key management team will continue unchanged, delivering the same benefits our independent retailer customers rely on - Peter Law, AIRR

"Like Elders, AIRR is a business with a track record of driving Australian agricultural success," he said.

"We have grown consistently since establishment in 2006 and we are pleased to be continuing this growth with the support of Elders.

"Our key management team will continue unchanged, delivering the same benefits our independent retailer customers rely on."

Elders told its shareholders the purchase could deliver "low single digit earnings per share accretion on a 2018-19 pro forma basis", and at least 10pc EPS accretion as synergies were realised.

To help pay for the acquisition offer, which comprises of a 50pc cash payment and 50pc Elders shares to AIRR members, Elders will conduct a $137m equity raising and issue $79m new Elders shares to AIRR shareholders.

The scheme of arrangement has been recommended to shareholders unless a superior proposal emerges, or an independent expert's analysis deems it not in the best interest of AIRR shareholder.

The move will beef up Elders' market share and strengthen its competitive position against the market leader Landmark which is now in the final months of its $469m Ruralco takeover, assuming its bid gets the green light from government regulators.

Landmark, owned by Canadian fertiliser giant Nutrien, has been working to overcome some concerns raised by farmers and the Australian Competition and Consumer Commission.

Farm sector unease centres on Nutrien's likely dominant position in the merchandise wholesale market and the impact in some regional retail marketplaces if the Ruralco takeover goes ahead.

AIRR's member-based buying and marketing group for the rural merchandise and pet and produce stores sector is supported by a network of eight warehouses servicing more than 1500 customers.

Its top 20 customers represented 22pc of group sales last financial year.

AIRR sources product from more than 650 suppliers.

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