Why did this ASX 200 stock just crash 11%?

Investors appear nervous about a $475 million acquisition.

ASX 200 stock Elders Ltd (ASX: ELD) tumbled 11.3% to an intraday low of $7.67 per share after coming out of a trading halt imposed yesterday.

The ASX agriculture stock has since recovered a little and is trading at $7.91, down 8.55%.

The fall follows Elders' announcement it has completed an institutional entitlement offer.

The capital raising generated gross proceeds of approximately $143 million at $7.85 per share.

The institutional offer forms part of a $246 million fully underwritten 1 for 5.05 pro-rata accelerated non-renounceable entitlement offer for both institutional and retail investors.

The company said it had received strong support from both existing and new institutional investors.

The retail offering, at the same price, will open next Monday, 25 November.

woman holding man's hand as he falls representing ups and downs of ASX investing

Image source: Getty Images

ASX 200 stock takes a dive amid capital raise

Elders said the institutional offer was a success, with approximately 90% of entitlements available to institutional shareholders taken up.

The funds will support the acquisition of Delta Agribusiness.

Elders announced yesterday it has agreed to acquire 100% of shares in the private Australian agribusiness for $475 million.

Delta provides rural products and advisory services via a network of 68 offices and 40 independent wholesale customers.

Over the 12 months to 30 June, Delta generated revenue of $835 million and earnings before interest, taxes, depreciation and amortisation (EBITDA) of $53 million.

In addition to the capital raising, Elders will fund the Delta purchase through a $110 million new revolving loan facility.

It will also issue $190 million in new Elders shares to Delta shareholders as scrip consideration for $8.52 per share.

What did management say?

Mark Allison, Elders' Managing Director and CEO, said:

It is pleasing to see the strong investor support for the acquisition of Delta Agribusiness and the equity raising, providing us with greater exposure to key local retail markets as well as a leading agronomy and farm advisory team.

Elders expect settlement of the new shares under the institutional offer on 26 November.

The new ASX 200 stock will be issued and commence trading on 27 November.

ASX 200 stock's retail capital raise opens next week

The retail component of the capital raise will open next Monday and close on 9 December.

If you own shares in this ASX 200 agriculture stock on 20 November, you are eligible for the offer.

The retail booklet containing more details of the deal will be available to investors next Monday.

The company expects to announce the results of the retail capital raise on 12 December. The new shares will be settled on 13 December and issued on 16 December.

They will begin trading on the ASX the following day.

Each new share will carry entitlement to the final FY24 dividend of 18 cents per share, with 70% franking.

Elders announced its FY24 results yesterday. The company reported a 55% fall in statutory profit after tax to $45 million. Underlying earnings before interest and tax (EBIT) came in at $128 million, down by 25%.

Elders share price snapshot

The Elders share price has risen by around 5% in 2024 so far.

This compares to a 9.5% bump for S&P/ASX 200 Index (ASX: XJO) stocks over the same period.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Elders. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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