A Central Queensland citrus business that has been family owned for more than half a century is set to change hands with a $200 million acquisition from Costa Group (ASX: CGC), the country's largest integrated fruit and vegetable company.
Costa is rattling the tin to shareholders at a 10.3 per cent discount of $3 per share to secure $190 million in funding towards the purchase of 2PH Farms, the largest citrus grower in northern Australia with farms in Emerald and Dimbulah.
The deal also includes an additional $31 million payment in July 2023 for the purchase of the 'Conaghans' property where a new citrus crop is currently being planted by 2PH.
This will boost Costa's total citrus plantings by 60 per cent to 4,513 hectares, and follows the acquisition of Sunraysia-based KW Orchards' citrus farm and packing operations in March.
Australia was the world's ninth-largest citrus exporter last year with the crop bringing in US$317 million (AUD$420 million) worth of international trade, returning substantially higher prices per kilo than competing nations such as South Africa, Chile and Peru.
Costa Group's 2020 results did not specify how much of its citrus crop was exported, but based on its reported run rate of around 70 per cent being shipped overseas, the company may have exported more than 60,000 tonnes which would account for almost a quarter of the national total.
Costa has already been selling 2PH's citrus domestically and overseas for more than a decade, and bringing the operation in-house will give the group diversification into a new growing region after some crops were damaged by hail in Colignan, Victoria.
Most of the citrus trees at 2PH are under five years old and are yet to hit full production levels, with tonnage set to double to 60,000 tonnes by 2025. Both farms are supported by large holdings of high and medium permanent water allocations, and also comprise 240 planted hectares of table grapes.
"2PH has a long and successful history, having been started by my parents John and Pam Pressler, uncle Geoffrey Pressler and Darryl Hess some 51 years ago," says 2PH farms owner Craig Pressler.
"We have invested a lot of hard work and effort into becoming the successful business we are today, which is an industry leader, with an established reputation as a breeder and grower of high-quality citrus and an iconic brand both domestically and internationally.
"2PH has had a close relationship with Costa for over a decade through our successful domestic marketing alliance with Bindi Pressler having performed the role of 2PH marketing manager, of both the citrus and grape crops."
Costa Group CEO Sean Hallahan notes a number of strategic benefits for Costa from the acquisition, with 2PH recognised as a premium citrus grower and exporter throughout Asia, having an established reputation as a market leader.
"There are a number of strategic benefits and alignments that will result from what is a financially compelling acquisition, which include greater export supply to key Asian export markets, production scale, increased variety offering, including rights to commercialise varieties with Plant Breeder Rights (PBRs) in certain jurisdictions, access to a proven 30-year proprietary breeding program, expanded geographic footprint and extended season timing," says Hallahan.
"2PH is not only a high-quality asset, but it will also complement and enhance our production footprint, our variety offering and market opportunities, both export and domestic.
"We are delighted with this acquisition and look forward to successfully integrating 2PH into the Costa business and further growing our citrus category and its world-renowned reputation."
Hallahan was promoted internally to take on the top job at Costa following the retirement of former CEO Harry Debney, who wasn't able to stay away for long with the announcement yesterday he would return as a non-executive director of the company effective 1 July 2021.
The company has clarified an early citrus harvest through May and June delivered tonnage ahead of forecast due primarily to early timing of the mandarin harvest, but performance has been affected by fruit fly restrictions in South Australia, adding extra cost.
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