Costa Group Holdings has accepted a revised and lower takeover bid from a consortium led by private-equity investor Paine Schwartz Partners.
In the same week that New York-headquartered Paine Schwartz Partners (PSP) and associates cut a previous offer from A$3.50 a share to A$3.20, the board of the Australia-based fresh fruit and vegetables grower and supplier have bowed.
The deal, struck through a so-called scheme implementation agreement, amounts to an enterprise value of about A$2.5bn ($1.6bn) and values Costa Group’s equity at A$1.5bn, the Sydney-listed business said in a stock exchange filing today (22 September).
Shareholders outside of the consortium-led takeover group now have to vote on the transaction at a yet-to-be-scheduled meeting. If approved, the deal is expected to be completed in the first quarter of next year.
PSP’s investment partners – “comprised of entities controlled” by the private-equity firm – include California-based fruit grower and retailer Driscoll’s and Canada’s British Columbia Investment Management Corp. Together, they hold a 19.6% stake in Costa Group.
In October last year, Costa Group said an “entity managed” by PSP had taken a 13.8% interest in the Australian business at A$2.60 a share, adding to the private-equity firm’s existing 2.4% stake.
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Costa Group chairman Neil Chatfield said today: “While the Costa board has confidence in the long-term fundamentals of the company, the Scheme provides certainty for shareholders in an uncertain operating environment by delivering cash proceeds to shareholders at an attractive premium.
“The Costa board has unanimously recommended that Costa shareholders vote in favour of the Scheme, subject to the various customary conditions.”
In 2017, Costa Group acquired a controlling interest in Morocco-based blueberry grower and supplier African Blue. That tie-up built on a similar berries partnership struck the previous year in China with Driscoll’s in which Costa Group is also the majority shareholder.
Through its joint ventures, Costa Group operates six blueberry farms in Morocco and four berry facilities in China.
The statement said the deal needs approval from the Chinese State Administration for Market Regulation, the Moroccan Competition Council and the European Commission.
Australia’s Foreign Investment Review Board, the country’s investment gatekeeper, also needs to rubber-stamp the deal having already given preliminary approval.
Costa Group’s shares closed the Australian trading day almost 7% higher at A$3.09.
In the financial year to 1 January, Costa Group posted revenue of A$1.4bn, an increase of 11.2%. EBITDA rose 12.8% to A$223.5m while net profit attributable to shareholders fell 7.8% to A$33.6m.
Net profit was also down in the first half of Costa Group’s new financial year, with the after-tax figure declining 6.2% to A$37.8m.
For the half-year period to 2 July, revenue increased 8.7% to A$770.7m, the company reported in August. EBITDA was up 7.2% at A$150.2m.