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Highlights:
- Elders (ASX:ELD) shares fall 11.3% after completing an institutional entitlement offer.
- The capital raise, which raised $143 million, supports the acquisition of Delta Agribusiness.
- Retail investors will have the opportunity to participate in the capital raise starting Monday, 25 November.
Shares of Elders Ltd (ASX:ELD), a leading agriculture company in Australia, experienced a sharp decline today, falling as much as 11.3% to an intraday low of $7.67. The drop came after the company completed a significant capital raise and announced the finalization of an institutional entitlement offer. At the time of writing, Elders shares have slightly recovered to $7.91, still down 8.55% from the previous close.
Elders' steep decline followed the announcement that it had successfully completed an institutional entitlement offer, raising approximately $143 million in gross proceeds at $7.85 per share. The offer was part of a larger $246 million capital raise, which also includes a pro-rata entitlement offer for retail investors. The institutional portion of the offering saw significant support, with around 90% of the entitlements taken up by institutional shareholders.
Despite the drop in share price, the market reaction suggests that investors are focusing on the long-term benefits of the capital raising, particularly the strategic acquisition of Delta Agribusiness, a private Australian agribusiness with a strong network of rural product services and advisory.
The capital raised will support Elders’ acquisition of Delta Agribusiness, which the company agreed to acquire for $475 million. Delta Agribusiness operates across Australia with 68 offices and a network of 40 independent wholesale customers. Over the past year, Delta posted solid financials, including $835 million in revenue and $53 million in EBITDA.
Elders aims to integrate Delta into its existing operations, enhancing its exposure to key local retail markets and strengthening its position in agronomy and farm advisory services. The acquisition is seen as a strategic move that will significantly expand Elders' footprint in the agricultural sector.
In addition to the institutional entitlement offer, Elders will fund the purchase of Delta Agribusiness with a $110 million revolving loan facility and $190 million in new Elders shares issued to Delta shareholders at a price of $8.52 per share.
Elders’ Managing Director and CEO, Mark Allison, expressed his satisfaction with the strong investor backing for both the capital raise and the Delta acquisition. In his statement, he emphasized that the acquisition of Delta would provide Elders with greater exposure to essential local retail markets and strengthen its agronomy capabilities. He also mentioned the positive impact of the new advisory team that Delta brings to Elders’ operations.
The settlement of the new shares under the institutional offer is set for 26 November, with the new shares expected to begin trading on the ASX on 27 November.
While Elders shares have taken a hit in the short term due to the capital raise and dilution concerns, the long-term outlook remains positive. The acquisition of Delta Agribusiness will help the company diversify and expand its footprint in a competitive agricultural market. The completion of the retail entitlement offer on 25 November will give retail investors a chance to participate at the same price, further supporting the company’s growth ambitions.
