Paine Schwartz Partners reduces offer for Australia’s Costa Group

Paine Schwartz Partners has reduced its offer to acquire Australian Securities Exchange-listed fruit and vegetable grower Costa Group, after the latter announced a “deterioration in the outlook” for H2 2023.

Costa told shareholders on September 18 that PSP had put forward a revised non-binding offer of A$3.20 ($2.06; €1.93) per share, which could also be reduced further should Costa pay a dividend of up to A$0.04 per share as proposed.

PSP’s previous offer, made on May 31, was a non-binding all-cash offer of A$3.50 per share for all the shares in Costa that it does not already own, after acquiring a 13.78 percent stake in October 2022 at A$2.60 per share.

Its new offer values Costa at a little under A$1.5 billion, compared with around A$1.6 billion at the previous offer price.

Costa Group announced on August 24 that it would see a “deterioration in the outlook for later-season quality across our citrus category,” which was estimated to have a negative impact of around A$30 million on full-year EBITDA-S (stock-based compensation). This was attributed to weather impacts that have led to lower production volumes in southern regions of Australia and an overhang from La Niña climatic conditions contributing to lower-than-expected fruit sizes.

The firm also said that table grape harvests were around 40 percent lower across the sector compared with the previous calendar year – also due to the weather in 2022 – leading to an EBITDA-S impact of A$9 million in H1 2023.

PSP was advised of these developments, which were confirmed at Costa Group’s H1 results announcement on August 31, leading to PSP downgrading its offer this month.

In a statement, Costa Group said: “The Costa board, together with its financial and legal advisors, is considering the revised non-binding offer and is continuing to engage with PSP regarding the terms and conditions of the offer to enable the Costa board to comprehensively assess whether the revised non-binding offer is in the best interest of shareholders.

“There continues to be no certainty that a binding offer will be received or that any transaction will eventuate.”

Costa Group is one of Australia’s leading agribusinesses and is 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 previously invested in Costa Group when the former was known as Paine & Partners, acquiring a 50 percent stake in July 2011 through its third fund. After further investment in the firm, Paine & Partners floated Costa on the ASX in July 2015.

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.

Paine Schwartz Partners has been raising its sixth agribusiness-focused 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 Agri Investor data.