October 30, 2012

Ruralco is weighing up its options in regards to making a bid to purchase Elders Rural Services despite being rebuffed by parent company Elders Limited last month when it suggested a merger arrangement.

Ruralco, which is the largest stakeholder in Elders Limited, says it is “disappointed” with this week’s announcement by Elders to put its Rural Services division on the market.

Elders’ Board announced to the ASX yesterday that it would sell Elders Rural Services “as part of an accelerated strategy to return value to shareholders”.

The Tasmanian-based Ruralco responded by saying it believed the sale of the Rural Services division – and Elders automotive division announced earlier – was “unlikely to create any shareholder value”.

“However the sale of Elders Rural Services creates opportunities for Ruralco,” a statement to the ASX said.

“Ruralco can potentially generate material synergies from an acquisition of Elders Rural Services.

“Ruralco will take a disciplined approach to any potential acquisition, to ensure that it creates shareholder value.

“Alternatively, Elders Rural Services may be sold to an overseas-based buyer.

“In these circumstances, Ruralco is well-placed for ongoing market share growth as the only remaining large Australian-owned rural services business with a proven business model attractive to key personnel.”

Earlier this month, Elders confirmed it had received a letter from Ruralco on September 10 proposing that the two companies explore a merger.

Under this proposal, the Rural Services division of Elders would have been merged with Ruralco and owned by both Elders and Ruralco shareholders.

On September 17, Elders responded by saying “it was not the right time” to consider a merger of the rural services business and it had a “strong preference for deferring any discussions”.

At the time Ruralco said it believed Elders’ “capital position” was not sustainable and that the merger option was the best alternative available to Elders to raise equity.