Elders break-up 'right decision'
THE embattled agribusiness Elders has told shareholders the decision to sell off its operations is correct because its high debts will prevent its share price ever really recovering.
Elders wants to sell its biggest unit, the rural services business, and also hopes to sell Futuris, its automotive interiors supply group, by early next year. If shareholders approve the moves, the company in its current form would cease to exist.
The company's share price has collapsed since hitting $23.20 in early 2008 to just 11¢.
The chairman, John Ballard, told shareholders at an at times emotional annual meeting on Thursday that the company's problems and capital structure would weigh on its market value no matter how strong the two businesses were.
"As we enter what appears to be one of the most favourable markets for Australian agricultural business for decades, Elders shareholders face inferior returns as the ownership structure mitigates against the market value of the core business being reflected in the share price," he said.
"These matters include anticipated debt levels and capital constraints and the prohibition of hybrid distributions and dividend payments."
The company said it has received many expressions of interest in its rural services unit - including from Ruralco - and pointed to the US group ADM's proposed $2.68 billion takeover of GrainCorp as proof of interest in Australian agribusinesses.
The Elders Rural Services name is expected to survive a takeover, due to its 180-year-old history, with it ranking as the nation's largest real estate company and provider of farm supplies, livestock buying and selling, and wool handling.
CommBank analysts have valued it at $268 million to $350 million.
Elders had also received non-binding proposals for Futuris, Mr Ballard said, and aimed for a sale agreement early next year.
On Monday Elders announced it expected to rid itself of most of its forestry assets by early next year following the sale of 30,000 hectares of timber operations that were part of managed investment schemes.
The company's involvement in managed investment scheme plantations has been a major contributor to its woes, with net debt at November 30 of $359.8 million, compared with $381.4 million 12 months earlier.
It posted a $60.6 million loss for the year to the end of September.
The company blamed weak livestock, farming production and automotive markets for lower sales and earnings in the first two months of its fiscal year.
Mr Ballard also said it had not been possible to insulate the businesses being sold from the impact of the sales process, but both businesses had capable management teams.