Odyssey Private Equity is to exit agriculture supplies and services company Delta Agribusiness with the business to be acquired by Elders (ASX: ELD) for $475 million.
The deal values Delta at about 11.1x its earnings before interest and tax (EBIT) for the 12 months to the end of June.
The acquisition is subject to clearance by the Australian Competition and Consumer Commission (ACCC). Elders is the dominant business in the agriculture supplies and services sector in Australia while Delta, which is a third its size, and operates from a network of 68 locations, is one of the larger other companies in the sector.
Elders said completion of the deal is expected in the first half of 2025 “principally due to the time expected to satisfy the ACCC clearance condition”.
Sydney-based Odyssey took a minority stake in Delta in the first half of 2019 investing an undisclosed sum from its 2017-vintage $275 million first fund. At that time, Delta operated from 28 locations across rural NSW and southern Queensland and employed more than 230 people, including more than 40 farm advisors and agronomists.
The company was founded in 2006 and has grown largely through acquisitions. These included North West Ag in Victoria and Agquire Rural Holdings and the business assets of David Grays Aglink in Western Australia.
Elders chief executive Mark Allison said Delta would not be amalgamated into the Elders business and would continue to operate as a stand-alone enterprise.
“Delta provides us with greater exposure to key local retail markets as well as a leading agronomy and farm advisory team to complement and extend our products and services range for rural and regional Australia,” Allison said.
“The culture and strengths of Delta will be preserved through our light touch integration strategy and we look forward to welcoming the Delta management and employees to Elders.”
Elders acquired agricultural chemicals business Titan Ag for $35 million in 2018 and Australian Independent Rural Retailers for $187 in 2019. This month (November) Elders expanded its agricultural lending and financial services operations by acquiring Riverland Lending Services of South Australia.
Delta managing director and co-founder Gerard Hines said: “There is a strong cultural alignment between Elders and Delta, as two trusted agribusinesses seeking to create value for our customers. Our management team will remain unchanged and we are excited to be able to continue to provide our customers with innovative and value-adding business solutions with the added support of Elders.”
Delta generated revenue of $835 million and EBITDA of $53 million in the 12 months to the end of June.
Odyssey has previously sought to exit Delta, commissioning investment bank UBS to scope out potential transactions in 2022.
Alongside Elders’ 18 November announcement of the planned Delta acquisition, the company’s shares were placed on hold as it began a $246 million equity raising for the deal.
Further funding is to be obtained through a $110 million new revolving loan facility.
$190 million of new Elders shares are to be issued to Delta shareholders at $8.52 per share. This will give Delta shareholders about a 10.5% stake in Elders. The shares will be subject to 15 months escrow.
Elders shares last traded at $8.65 giving the company a market capitalisation of $1.4 billion.
Image: A major part of Delta Agribusiness involves providing technical advice to farmers.