Australian horticultural giant Costa Group has agreed to acquire Coastal Avocados farms in New South Wales, bringing the number of regions where it grows the fruit to four.
The purchase will be made in partnership with Macquarie Agricultural Funds Management, as part of a tie-up initiated in December 2016 through the acquisition of Avocado Ridge in Queensland and continued with the Lankester Avocado orchards in June 2017.
Like in previous instances, the agreement states that Macquarie will own the farms, with Costa entering into a 20-year lease to operate them. In January, the pair also closed on the purchase of the Gunalda and Burness farms, which it described as “bolt-on acquisitions” to its existing holdings in the Atherton Tableland and Central Queensland growing regions.
These latest deals mean Costa and Macquarie have together deployed A$110 million ($86 million; €70 million) since the beginning of their joint venture.
These announcements were made as part of Costa’s release of its annual results. The group’s shares jumped nearly 10 percent on the news, helping them post gains of 79 percent over the past 12 months.
Part of this can be attributed to the company’s strong financials – including a near 25 percent EBITDA growth – with the group’s tomato and citrus harvests respectively described as “excellent” and “exceptional”. But investors are also paying attention to Costa’s efforts to become Australia’s leading avocado grower and seize the lion’s share of a A$300 million market.
Top of the crop
The Coastal Avocados farms cover 79 hectares of planted orchards, with a further 24 hectares of greenfield development land. Gunalda comprises 92 hectares of which 36 hectares are currently planted, with plans to develop another 15. Burness currently runs 23 hectares.
Once the Coastal Avocados purchase completes, which is expected in the first half of this year, Costa will operate 679 hectares, bringing it closer to its eventual goal of 1,000 hectares. Its production and supply footprint will soon stretch from February to December.
“We are now well under way to executing our strategy to build avocados into our fifth core vertically integrated produce pillar and to ultimately achieve 52-week supply,” said Costa chief executive Harry Debney.
The company used to be majority-owned by New York-based Paine Schwartz Partners, which backed Costa in 2011. The company completed an IPO on the Australian Stock Exchange in 2015, raising about A$550 million. Paine Schwartz reportedly sold part of its remaining stake in the company last year, bringing it under 5 percent.
The news comes in the wake of Macquarie’s first close on its latest agricultural fund, for which it is aiming to collect A$1 billion. The vehicle, which has a 15-year term, will target row and permanent cropland across five to seven climatic zones in Australia.
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