Elders will acquire Australian Independent Rural Retailers for $187m. The acquisition will be funded via cash and scrip. Morgans considers the purchase price reasonable, given the size of the group.
This will mean Elders has a presence in the wholesale channel, and the acquisition fills a gap in Queensland and NSW as well as increasing the company’s presence in the higher-margin animal health sector.
Morgans calculates the mid point of synergies is 8.9% accretive to earnings per share in FY21. Rating is upgraded to Add from Hold. Target is raised to $7.30 from $6.71.
Sector: Food, Beverage & Tobacco.
Target price is $7.30.Current Price is $6.13. Difference: $1.17 – (brackets indicate current price is over target). If ELD meets the Morgans target it will return approximately 16% (excluding dividends, fees and charges – negative figures indicate an expected loss).
