WA agribusiness to list

Osborne Park rural supply business FarmWorks will join the ranks of agribusiness players on the ASX after shareholders in former IT stock ETT today agreed to a backdoor listing proposal.

ETT will be renamed to FarmWorks whose current employees and management, including managing director Kevin Gammage, chief financial officer Ross Withers and general manager merchandising operations Fred Lyon, will end up with 25 per cent of the equity in relisted vehicle which is expected to have a market capitalisation of between $10 million and $12 million.

The deal will also provide more equity to the existing FarmWorks shareholders if earnings targets are reached over the next two years.

The listed company will be run by former AACo chief operating officer David Connolly who was appointed CEO today after the shareholders backed the deal.

FarmWorks was started in 2004, manufacturing, wholesaling and retailing chemicals to the farm sector. It has several brands under its Conquest Agro Chemicals business.

It has since expanded into other areas servicing rural business, reaching peak sales of $92.3 million last financial year, just up on similar sales the year previous. About 75 per cent of its sales were in Western Australia. It claims about 4-5 per cent of the $1.5 billion rural merchandising market.

It made an operating loss of $347,000 last year but the prospectus shows normalised earnings before interest and tax of $2.5 million for the period.

Mr Connolly said the founders had opted for the listing to ensure the company’s growth could be maintained.

“The business has grown so quickly they have got themselves into a position to access funding for the growth of their business,” he said.

ETT was previously an IT business which had software and licences for internet kiosks.

According to the prospectus the total purchase price for the proposed acquisition includes:

• Shares totalling 25% of the capital of ETT (508,545,255 pre-consolidation Shares in

total);

• Options totalling 25% of the options to acquire shares in ETT currently on issue

(100,418,936 pre-consolidation options in total);

• 2.5% of the total issued capital of ETT in options to acquire shares if FarmWorks

achieves EBIT of $5,000,000 in the 12 months after completion;

• 2.5% of the total issued capital of ETT in options to acquire shares if FarmWorks

achieves EBIT of $10,000,000 in the 24 months after completion; and

• deferred consideration up to a maximum of $800,000 (to be paid in equal monthly instalments

of $33,333 for 24 months)