Despite the drought, rural business seems to be ‘hot’ judging by the way Elders shares took off yesterday.
They soared 15% after emerging from a trading halt having raised $100 million to fund its acquisition of wholesale buying group Australian Independent Rural Retailers (AIRR).
Elders said on Wednesday it had completed an institutional placement of $40 million and an institutional entitlement offer of $60 million.
Under the institutional entitlement offer, for every 6.7 shares that institutions held they were eligible to buy one new share for $5.55 – a 9.5% discount to Elders’ share price of $6.055 when it entered the trading halt on Monday.
They closed at $7.08 yesterday, giving those investors who took up the shares an immediate fat profit.
Elders said about 92% of eligible institutional investors took it up on the offer (those who didn’t must have kicked themselves with yesterday’s spike in the share price).
CEO Mark Allison naturally was “pleased with the strong support”.
The entitlement offer for retail investors under the same terms opens on Monday, with the aim of raising about $37 million. That will be a test fo the standing of Elders among small investors.
Elders is raising the money to acquire AIRR in a cash and scrip transaction that values the company at $187 million, not including its $30 million in debt.
AIRR is a wholesaler with eight warehouses that supplies agricultural chemicals and animal products to 340 independent rural merchandise, pet and produce stores.
Mr. Allison said the acquisition would give Elders “a national wholesale platform of scale” and Elders says it has the potential to deliver net synergies of about $8 million a year.
Elders says it will keep AIRR will be kept as a standalone business.
