Paine Schwartz Partners bids to acquire Costa Group for second time

Paine Schwartz Partners, which previously invested in Costa from 2011-15 before listing it, has bid to acquire it again in a deal worth A$1.6bn.

Paine Schwartz Partners has launched a full takeover bid for the Australian Securities Exchange-listed agribusiness Costa Group, after acquiring an initial stake in the firm in 2022.

Costa Group told shareholders on July 4 that the US-headquartered private equity firm made an unsolicited, non-binding indicative all-cash offer on May 31 of A$3.50 ($2.34; €2.14) per share for the all the shares in the business that it did not already own, after it acquired a 13.78 percent stake in October 2022 at A$2.60 per share.

PSP subsequently engaged with Costa over a potential bid in the range of A$3.20-A$3.30 per share before settling on its latest offer, Costa said. PSP reconfirmed its intention to pursue the offer on July 4 after a four-week period of initial due diligence, having been granted eight weeks of exclusive due diligence by the Costa board that began on June 6.

The offer represents a 34.6 percent premium to the A$2.60 price at which PSP acquired its first stake in Costa last year and values Costa at around A$1.6 billion.

PSP has received approval from the Foreign Investment Review Board for its takeover, but Costa said in a statement that this may need to be revisited should any co-investors join the private equity firm in the transaction.

“Notwithstanding recent media speculation that Costa and PSP were hopeful of an agreed deal in coming days, further due diligence and negotiations on a potential scheme implementation agreement are expected to continue through July. There is no certainty that the indicative proposal will result in a binding offer or that any transaction will eventuate,” Costa said.

With negotiations to continue through July, shareholders are set to receive any interim dividend declared for the six-month period ending July 2, 2023, of up to 4 cents per share.

PSP has been in market raising its sixth agribusiness private equity fund, Food Chain Fund VI, which has a hard-cap of $2 billion and had raised $1.6 billion as of May 2023, according to PEI Group data.

Costa Group is one of Australia’s leading agribusinesses, tracing its roots back to the 19th century. It is now one of the country’s largest growers, packers and marketers of fresh fruit and vegetables, focused mainly on berries, mushrooms, glasshouse-grown tomatoes, citrus and avocados.

PSP has invested in Costa Group before when the former was known as Paine & Partners, buying a 50 percent stake in July 2011 through its third fund. After investing further in the firm, Paine & Partners floated Costa on the ASX in July 2015, raising around A$550 million.

Costa now operates more than 7,200ha of planted farmland, 40ha of glasshouse facilities, and three mushroom-growing facilities, as well as majority-owned joint ventures operating six blueberry farms in Morocco and four berry farms in China.

Costa leases several citrus and berry farms from Macquarie Asset Management, which the latter took control of when it acquired Vitalharvest Freehold Trust in 2021.