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One of Australia’s largest fruit and vegetable producers, Costa Group Holdings (ASX: CGC), has announced today it is accepting a $1.49 billion takeover offer from a consortium led by private US equity firm Paine Schwartz Partners (PSP).
The approved $3.20 a share deal comes after months of negotiations with the suitor, which slashed its initial $1.6 billion offer after Costa revealed underlying profit for the full year would take a $30 million hit due to unfavourable growing conditions.
If the deal overcomes regulatory hurdles, it will see the consortium snap up the remaining 85.16% stake it does not already own. Led by PSP, the consortium also comprises entities controlled by the world's largest berry company Driscoll's Inc and the British Columbia Investment Management Corporation (BCI).
The Costa board has unanimously recommended that shareholders vote in favour of the scheme, in the absence of a superior proposal and subject to an independent expert review.
“The board is committed at all times to acting in the best interests of shareholders and with this firmly in mind, carefully considered a range of factors in arriving at its recommendation,” Costa Group chairman Neil Chatfield said.
“This included a number of different valuation scenarios, potential risks relating to the future execution of Costa’s business growth plan, and the price at which Costa shares could trade over the medium to longer term if it continues as an independent listed company.
“Accordingly, the Costa board has unanimously recommended that Costa shareholders vote in favour of the scheme, subject to the various customary conditions.”
Founded in 1937, Costa Group is a large grower of berries, citrus fruit, mushrooms, avocadoes and tomatoes. It currently operates more than 7,200 hectares of farmland in Australia, in addition to operating facilities in Morocco and China. The company also exports 10 per cent of its produce to North America, South America, Europe and Asia.
For the deal to go ahead, it will require approval from multiple regulators, including the Chinese State Administration for Market Regulation, the Moroccan Competition Council, and the European Commission.
PSP showed its intentions for a takeover of Costa Group in May this year when it issued an unsolicited, confidential, non-binding indicative proposal to acquire all of the shares in Costa it didn’t already own. PSP had previously snared a 13.78 per cent stake in Costa on 25 October 2022.
However, the US investor has been involved in the Costa Group journey for much longer than that, having been a majority owner of the company prior to its 2015 initial public offering (IPO) on the ASX with its first equity stake acquired in 2011, back when its name was Paine + Partners.
Subject to conditions being met, implementation of PSP’s latest deal with Costa Group is expected to occur in the first quarter of 2024.
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