DIVERSIFIED listed agribusiness Elders Ltd is in an acquisitive mood, following completion of a $102 million capital raising exercise announced this morning.
In an advice to the ASX, Elders said it had completed the placement of 7.35 million new shares at $3.40 per share, raising about $25m, and had fully underwritten a one-for-four non-renounceable entitlement offer at $3.40, to raise a further $77.4m.
The additional equity greatly strengthens Elders balance sheet.
Proceeds from the placement and entitlement offer will be used primarily to fund the acquisition of the outstanding ASX-listed Elders hybrid shares, simplifying the company’s capital structure. Surplus funds raised will be used for general working capital and potential acquisition opportunities, the ASX was told.
Elders chief executive Mark Allison said the offer to acquire the hybrid shares – a legacy of the old Futuris corporate days – had attracted solid interest in the placement by a range of significant local and offshore institutions, providing an opportunity for Elders, to the benefit of its ordinary shareholders, helping ‘normalise’ its capital structure.
The move would provide Elders with the ability to invest in organic growth targeting synergistic agribusinesses, with return on capital of around 20pc, the market was told.
The capital raising delivered capacity to pursue a pipeline of ‘bolt-on’ accretive and complementary acquisitions, with priority growth areas seen as real estate, livestock, financial services and capital light retail, Elders said.
“The investment focus will be on areas of core strength, with candidates at attractive multiples around 4-6 times Earnings Before Income Tax (EBIT).”
The planned organic growth would be funded from free cash flow (minimising tax paid) and balance sheet strength, the market was told.
Mr Allison told Beef Central he expected announcements about acquisitions over the next six months.
The company also intends commencing fully-franked dividends for the 2017 fiscal year (up to 35pc underlying NPAT payout ratio).
Elders suggested there was a positive outlook for its Australian businesses, with live export seen as a segment likely to remain under pressure.