RURALCO'S biggest shareholder has thrown its support behind the company's push for a $500 million merger with Elders.
Robert Millner, chairman of Ruralco's biggest shareholder, Washington H Soul Pattinson, described Elders as a "shocking business" but said there was merit in carving off its rural services arm and merging it with Ruralco's 500-strong branch network.
"We have been supportive of them [Ruralco] pushing ahead," Mr Millner told The Australian Financial Review. "It is a way for them to grow themselves. They have shown they can run themselves more successfully [than Elders]."
Elders has been attempting to return to its rural services roots since 2008, selling off assets including its banking and insurance businesses to desperately pay down more than $1 billion in debt.
Mr Millner, whose cousin and recently retired WHSP deputy chairman Michael Millner is a Ruralco director, said it was a matter for Ruralco to decide how it proceeds after Elders declined its merger offer.
Elders wants more details from Ruralco, describing its initial approach in September as being "conceptual" in nature and lacking financial details to be evaluated by the board.
"All they have provided is at best an incomplete concept, and when we sought more information we received nothing," Elders chairman John Ballard told The Australian Financial Review in a statement.
Ruralco insists there is too much balance sheet uncertainty surrounding its rival to return with a more detailed proposal.
However, it has offered hybrid holders a modest premium and said it wants to strike a "nil premium" merger. Elders says these details highlight Ruralco's ability to deliver better financial information about the merits of its proposal.
Analysts expect the merger talks to remain in a stalemate until after both companies report 2011-12 results next month. The Ruralco board is due to meet on October 25 and is likely to discuss its options. It does not want to remain a long-term holder of Elders shares.
Mr Ballard has rejected suggestions Elders' financial situation had deteriorated significantly, fanned by the resignation of director Rob Wylie, the head of its audit committee on August 15, six weeks before the end of its financial year.
The Australian Financial Review
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