Elders to Acquire Delta Agribusiness for AUD 475M, Reshaping Australia's Agricultural Services Landscape

Date:11-20-2024

Elders Limited (ASX:ELD), a prominent Australian agricultural services company, has announced a significant agreement to acquire Delta Agribusiness Pty Ltd (Delta) for AUD 546 million. The enterprise value, excluding transaction costs and lease liabilities, amounts to approximately AUD 475 million, demonstrating Elders' continued commitment to strengthening its position in Australia's agricultural services sector.

Delta Agribusiness, established in 2006, has established itself as a leading agricultural service provider in Australia, operating through 68 locations and serving approximately 40 independent wholesale customers. For the twelve months ending June 30, 2024, Delta reported robust financial performance with revenue of AUD 835 million and EBITDA of AUD 53 million.

In FY2024, Elders reported revenue of AUD 3.1 billion, representing a 6% year-on-year decline across its agricultural services, livestock, and real estate divisions. Despite the revenue decrease, gross profit increased by AUD 28.62 million to AUD 981 million, marking a 3% growth. The company's underlying EBIT stood at AUD 197 million (equivalent to USD 128 million), slightly below median expectations. Net debt increased by AUD 272 million to AUD 672 million, while the return on capital decreased from 16% to 11.3% in FY2024. Inventory levels reduced by AUD 145 million, with accounts receivable increasing by AUD 242 million.

The transaction will be financed through a combination of equity investment (AUD 246 million), senior debt (AUD 110 million), and the issuance of 22 million new Elders shares to Delta shareholders at AUD 8.52 per share (total scrip consideration of approximately AUD 190 million).

Mark Allison, CEO of Elders, emphasized the strategic significance of the acquisition: "This transaction will substantially enhance our market presence across New South Wales, North West Victoria, South Australia, and Western Australia. Delta's exceptional agronomy and farm advisory capabilities will perfectly complement our existing technical service network, particularly in agricultural technology and precision farming."

Following Elders' "light touch integration" approach, Delta's management team and operational structure will remain unchanged post-acquisition. Gerard Hines, Managing Director and Co-Founder of Delta, highlighted the cultural alignment: "Both Elders and Delta share a deep commitment to creating value for our customers. With Elders' support, we will continue to deliver innovative solutions to our clients."

Delta's comprehensive business portfolio encompasses crop protection, seeds, animal health products, fertilizers, fuel, and general merchandise, including its proprietary agricultural chemicals and animal health private label brands. The company is renowned for its professional agronomy team and precision agriculture specialists who provide comprehensive farm advisory services.

The transaction is subject to approval from the Australian Competition and Consumer Commission (ACCC) and other customary conditions, with completion expected in the first half of 2025. MinterEllison, led by Partners Bart Oude-Vrielink and Sudharshan Senathirajah, is serving as legal advisor to Elders.

This strategic acquisition is set to reinforce Elders' leadership position in Australia's agricultural services sector. By integrating the complementary strengths of both organizations, the combined entity will be better positioned to provide comprehensive and professional services to agricultural clients, furthering the modernization of Australia's agricultural industry.