In a bid to retain their share of the rural merchandise market, Elders Ltd have raised $137 million to buy a one hundred per cent stake in Australian Independent Rural Retailers network.
The news comes soon after it was announced that Landmark’s parent company, Canadian-based Nutrien, was negotiating to buy the RuralCo brand, a sale that would make them the dominant player in the market with more than 330 shopfronts. The sale of AIRR will likely tip the scales in Elders favour, adding 240 rural merchandise stores to their existing portfolio of 217. The AIRR company also includes 100 Tuckers Pet and Produce stores.
The sale of RuralCo had attracted the attention of the ACCC, which has expressed concerns about the dwindling number of competitors in the rural merchandise market. These concerns are likely to be compounded by the sale of AIRR to Elders, but the ACCC is yet to formerly announce their concerns.
Earlier this month it was reported that Elders had raised $137 million in capital to buy AIRR, paying $10.85 per share in a half scrip, half cash deal. Under the agreement, AIRR shareholders will be paid in cash, and with a portion of $79 million in newly created Elders shares. At $10.85 per share, Elders offer is a 27% raise on the average value of AIRR shares over the last two months.
Current AIRR Managing Director Peter Law said that he believed that merger would benefit customers and staff as well as shareholders.
“Like Elders, AIRR is a business with a track record of driving Australian agricultural success,” he said.
“We have grown consistently since establishment in 2006 and we are pleased to be continuing this growth with the support of Elders.
“Our key management team will continue unchanged, delivering the same benefits our independent retailer customers rely on.”
Elders Managing director Mark Allison was equally positive about the transaction, especially given AIRR is predicted to earn $23 million (before depreciation and amortisation) in the 12 months to September 2019.
“Acquiring AIRR will give Elders a national wholesale platform,” said Mr Allison.
“We look forward to further enhancing AIRR’s offering to its diverse customer base and continuing to grow the business together.”
Elders and AIRR have assured their networks that there will be no significant changes to current business protocols after the transaction is completed.
“At the same time, by preserving continuing 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,” Mr Allison said.