Should we sell out to Elders?

Extracted from the Farm Tender weekly Newsletter - Sign up and get the email every Wednesday morning before 5 am. www.farmtender.com.au

By Dwain Duxson.

It's a question I got asked the other day, "would you sell to one of the big boys, Elders, Nutrien etc"?

And for the record, Elders or Nutrien have never (to my knowledge) taken any interest in our business, let alone put an offer on the table. Bit of a cheeky headline.....

But it's an interesting question all the same, especially now that we are 10 years in, have independence, and have nearly 60,000 (mainly Farmer) members.

I will answer the question later.

Whilst on the Elders topic, I admire what CEO Mark Allison has been able to do with that company in his 8 years as CEO. He has really turned the business around, and the future looks very bright.

And for what it's worth, we are just about to put a new board in place ourselves, and perhaps we should be aiming at getting the likes of Mark on one day. Cheeky invite.....

So what's the state of play in the big end of town.

I think we are going to see some more consolidation with the larger Agribusinesses buying out or partnering with others in the space. We have seen expansions with some of the dealers like O'Connors, Brandt (formerly Cervus), Emmetts, and Hutcheon and Pearce.

Elders themselves have been acquiring independent Livestock and Real Estate agencies and have an appetite for more. I am sure Nutrien isn't just stopping after adding Ruralco.

I think Bega is on the right track, buying into food brands like Vegemite, Farmer Union, Pura, Dare, Vitasoy etc.

There is a push to start manufacturing more of our food commodities here in Australia. I found this quote in "The Australian" last week. "Looming global food security issues are creating a "huge opportunity" for Australian producers to "go up the value chain" in the next decade – and could turn a sector long shunned by investors into a lucrative one", high-profile stockbroker Angus Aitken says.

This week, the ASX (Australian Stock Exchange) announced the newly formed AgBiz index, which features 25 Ag-based listed companies. This is great news for our sector and will lift the spotlight and bring more capital into Australian Ag. Some of the companies in the AgBiz index include GrainCorp, Bega, Elders, Tassal, A2 Milk, Ridleys, Nufarm etc. Collectively they have a combined market cap of $30 billion when released. What an exciting thing for Ag.

It's not only the Australian incumbents who are looking at mergers and acquisitions. Keep an eye out for a few US companies that might start sniffing around. FBN is one that looks like doing an IPO in the next 12 months, and when that happens, they will be on the hunt for acquisitions as they are talking an $US8 billion valuation. They have already bought WA based Chemical distribution business Farmsave.

Also, keep an eye out for companies like Bushel and AgVend. These two offer software that overlays the Grain Bulk Handlers infrastructure (Bushel), and the local retail Ag Store (AgVend) and will be looking to enter the Australian market. Bushel and AgVend are new-age Ag companies, they both have fantastic business models and are becoming big businesses in their own right.

There is heaps more going on, but too much to mention.

With all this and more going on, we are seeing Ag's profile grow, and for us to be a $100 billion industry by 2030 it's going to require billions of dollars of capital investment for things like digitising supply chains, upgrading infrastructure, the list goes on. I think the AgBiz index will be a great help.

Now, getting back to the question.

I don't think we (Farm Tender) are at that point yet where too many would be interested in buying us. We have so much more we want to do, and as a business, we have only just scratched the surface we feel. So right now, no, but things change.

In the meantime, we'll just keep chipping away.

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