Duxton Farms’ Agricultural Merger Hinges on Shareholder and Court Approvals

Strategic Agricultural Merger Proposed

Duxton Farms Ltd, an ASX-listed agricultural investment company, has proposed a scheme of arrangement to acquire all issued preference shares of Duxton Dried Fruits Pty Ltd. The transaction offers Duxton Dried Fruits shareholders a combination of scrip and cash consideration, with 0.729 Duxton Farms shares offered for each Duxton Dried Fruits preference share, and the option to receive up to 20% of the consideration in cash.

This acquisition is part of a broader merger plan that also includes Duxton Bees Pty Ltd, Duxton Walnuts, and potentially Duxton Orchards. The merger aims to establish a larger, more diversified agricultural investment platform, enhancing scale, operational synergies, and access to capital markets.

Independent Expert Endorses Transaction

Leadenhall Corporate Advisory Pty Ltd, engaged as the independent expert, has valued Duxton Dried Fruits preference shares on a control basis between $0.59 and $0.79. The expert report concludes the transaction is fair and reasonable, recommending shareholders vote in favor of the scheme. The valuation was primarily based on a discounted cash flow analysis, supported by cross-checks against recent capital raisings and net tangible asset multiples.

The scrip consideration’s value is supported by recent trading in Duxton Farms shares, which have been moderately liquid and well-informed. The independent expert also notes the benefits of increased liquidity and retained exposure to the agricultural sector for Duxton Dried Fruits shareholders.

Conditions and Approvals Required

The scheme is subject to customary conditions precedent, including approval by Duxton Dried Fruits shareholders, Duxton Farms shareholders, and the Federal Court of Australia. Regulatory approvals, including from the Foreign Investment Review Board, are also required. Escrow arrangements will apply to shares issued as consideration, with certain shareholders’ shares subject to escrow for up to 18 months.

Duxton Farms has also announced a fully underwritten institutional share placement to partly fund the cash component of the consideration, with shares to be issued at $1.25 each. The merger is expected to enhance the combined group’s scale, diversification, and growth prospects across multiple agricultural sectors including dried fruits, apiary, walnuts, and potentially orchards.

Outlook and Market Implications

The merger is positioned to create one of Australia’s largest diversified agricultural portfolios listed on the ASX, with exposure to a broad range of commodities and geographies. The combined entity is expected to benefit from operational synergies, improved access to capital, and increased liquidity for shareholders. However, the final value of the scrip consideration will depend on Duxton Farms’ share price, which may fluctuate in the lead-up to implementation.

Shareholders and analysts should monitor upcoming shareholder meetings, court approvals, and regulatory developments closely. The merger’s success will hinge on satisfying all conditions precedent and effectively integrating the businesses to realise anticipated synergies and growth opportunities.