Elders shares drop on Delta buyout progress, FY25 sales warning
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More news: Elders shares plunged at the open before clawing back some losses, after the competition regulator said it would not oppose the group's proposed acquisition of Delta Agribusiness, subject to the divestment of six Delta stores.
Shares were down 3.7% to $7.06 at 11:15am AEDT, having tumbled more than 10% at the open. The stock is down 16.6% over the last 12 months.
Elders said this morning that the divestments would equate to less than $300,000 in earnings for the financial year ending 30 September.
However, ahead of the release of its FY25 results next month, Elders warned that its full-year performance was negatively impacted by lower retail sales and thinner margins.
ACCC clears Elders' $475m acquisition of Delta Agribusiness
The news: The competition regulator has said it will not oppose Elders' proposed acquisition of Delta Agribusiness after accepting a court-enforceable undertaking that will see the sale of six Delta stores in Western Australia.
The numbers: Elders agreed to buy Delta for $475 million last November, with completion initially expected to occur in the first half of 2025.
The context: The Australian Competition and Consumer Commission (ACCC) — which outlined concerns with the acquisition in May, then extended its review of the deal in August — found that the proposed takeover would be likely to "substantially lessen competition" in several local areas in WA.
The ACCC consequently accepted Elders' offer to divest six Delta stores in the state. The regulator has approved Independent Rural as the purchaser for Delta stores in Dalwallinu and Kalannie, and Muirs as the purchaser for stores in Albany, Hyden, Manypeaks and Wellstead.
The ACCC said the proposed acquisition is "unlikely to substantially lessen competition" at a broader regional, state or national level.
Elders said it now expects the Delta acquisition to complete on 3 November. It noted that the combined underlying earnings before interest and taxes (EBIT) of the six divested branches in FY25 would be less than $300,000.
Meanwhile, Elders told investors this morning that its FY25 performance has been negatively impacted by lower retail sales due to dry conditions in southern Australia and a later start to cropping season. Its margins were also impacted by heightened competition pricing resulting from the later season and crop protection traders seeking to avoid carry-over inventory.
The group expects underlying EBIT to be between $142 million and $146 million for the financial year ending 30 September, up from $128 million reported in FY24. It will release its FY25 results on 17 November.
What they said: "The ACCC considers that the undertaking provided by Elders addresses the competition concerns that would otherwise arise from the proposed acquisition," said ACCC deputy chair Mick Keogh.
"Independent Rural's and Muirs' acquisition of Delta stores in each of these local areas will create a strong, independent and viable long-term competitor to Elders in those six areas."
Elders managing director and CEO Mark Allison said: "We are pleased with the outcome of the ACCC's deliberation and are looking forward to supporting Delta in the next phase of its growth post-completion".
