Less than three months after buying a 10 percent stake in Elders Limited, Ruralco has increased its shareholding in the rural services giant by a further 1.94pc.
The move takes Ruralco’s shareholding in Elders to 12.04pc.
In a statement to the Australian Stock Exchange, Ruralco managing director John Maher played down talk of a takeover.
“This increase in shareholding establishes Ruralco as the largest shareholder in Elders and is consistent with Ruralco’s strategy to strengthen its participation in the agribusiness sector,” Mr Maher said.
“As previously announced, this is a strategic investment and there is no current intention to make a takeover offer for Elders.
“Ruralco’s focus remains clearly on the continued strong performance of our existing operations. It is business as usual for our people and customers,” Mr Maher said.
Financial commentator Robert Gottliebsen recently singled out RuralCo’s strong growth performance for attention, noting that it had been growing above 9pc annually, and, even more significantly, its underling EBIT (Earnings Before Interest and Tax) had grown by 40pc over the same period.
Ruralco’s directors had attributed the growth to a focus on growing the margins of its business and finding the most effective way to generate returns on capital employed. It had also been reducing its debt.
On Ruralco’s recent purchase of a 10pc stake in Elders, which he described as a ‘rather aggressive step’, Mr Gottliebsen said Ruralco was clearly pondering whether to buy control of the struggling giant or simply to have a seat at the table if is a raid.
“My guess is that Ruralco or any raider would want to sell Elders' automotive parts business and other areas of its operation that might be distractions,” he said.
“The difficulty in trying to buy Elders is the $150 million in hybrids. Elders hybrids have a nominal value of $100, compared with a market price of $35.
“Anyone who buys control of Elders equity has to take into account the hybrids. Ruralco's dabble in Elders adds a greater degree of risk to the stock, but the Ruralco management looks unlikely to let size to go to their heads.”