Elders Hybrids
Recommendation
It appears Elders' chairman John Ballard and chief executive Malcolm Jackman have had enough, or at least their bankers have. The company yesterday announced the accelerated sale of its rural services business, which effectively signals the wind up of the company. This follows the August announcement that its automotive business is also on the auction block.
Elders claim this move is motivated by taking control of any takeover process; most likely from significant shareholder Ruralco who have expressed a clear interest in the rural services business. This move could also help smoke out another bid, especially at a time when Aussie agriculture businesses are gaining international attention, such as Archer Daniels Midland Company's proposed $2.7bn takeover of GrainCorp.
Either way, this move should swiftly bring an end to the Elders saga. Ordinary equity holders aren’t likely to end up with much following any wind up, but there remains enough value on the table for Elders Hybrids owners to stay put. The security price has risen 7% since 20 Aug 12 (Hold – $41.50), and we’d welcome the chance to exit the hybrids at around $70. For now though, HOLD.
Note: The model Growth portfolio owns Elders Hybrids.