The agribusiness announced last Monday it had entered a scheme of implementation to acquire 100 per cent of AIRR’s shares, with the half-scrip, half-cash bid already receiving the blessing of the takeover target’s board.
Elders, which remains in a trading halt, said it was funding the acquisition through a $137million equity raising and the issue of $79million worth of its own shares to AIRR shareholders.
The $10.85 per share deal values AIRR at $157million on an equity basis and $187million on an enterprise value basis.
The deal will pay down $30million in existing AIRR debt, $18million of Elders’ debt, and will include $10million in transaction costs.
Elders is targeting a settlement and the issue of new shares by August 14.
The company said the acquisition would allow it to enter the wholesale rural services market with net synergies of $6.6million to $9.33million a year, to be gradually realised during the next two years.
‘‘Acquiring AIRR will give Elders a national wholesale platform,’’ Elders chief executive Mark Allison said.
‘‘By preserving continuity 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.
‘‘The deal is subject to AIRR shareholder backing, as well as support from the ACCC and the courts.’’
Last month the consumer watchdog raised concerns over the proposed takeover of Elders’ rival RuralCo by Canadian fertiliser giant Nutrient Ltd, stating antitrust fears and potential discrimination against some independent retail stores.
The ACCC’s decision on that case is set to be announced on August 15.
Established in 2006, AIRR is a member-based buying and marketing group for independent rural merchandise and pet and produce stores.
The business is supported by a network of eight warehouses servicing more than 1500 customers, with about 240 independent member stores and an additional 100 Tuckers Pet and Produce stores.
AIRR also owns and operates five retail locations in Victoria.
In September 2018, AIRR acquired The Hunter River Company, which makes products for cattle, sheep and equine health.
Elders said AIRR was expected to generate earnings before tax of $21.9million for the 12 months to September this year.
Shares in Elders were trading at $6.13 prior to entering a halt at last Monday’s open.
The company has also reaffirmed its 2019 guidance of $61million to $64million in underlying net profit.
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