In a sudden turn of events, Costa Group Holdings Ltd announced on Monday that U.S. private equity firm Paine Schwartz Partners (PSP) has downgraded its non-binding takeover bid for the shares it does not yet hold, placing the horticulture giant at a valuation of A$1.49 billion ($958.4 million). This surprising move comes after an initial offer in July, which valued each share at A$3.50, higher than the current A$3.20 per share offer for the remaining 85.16% stake that PSP does not already possess.
Despite the reduction, the latest bid still maintains an 8.8% premium on Costa’s last closing price. As Australia’s premier fresh fruit and vegetable grower, packer, and marketer, Costa is deliberating on the revised offer while maintaining ongoing communication with PSP about the terms and conditions of the deal. This development follows PSP’s acquisition of a 14.84% stake in Costa, up from 13.78% last October, at A$2.60 a share.
Paine Schwartz Reduces Takeover Offer for Costa Group Holdings
U.S. private equity firm, Paine Schwartz Partners (PSP) has revised its non-binding takeover offer for Costa Group Holdings Ltd, a leading Australian horticulture company. The revised valuation stands at A$1.49 billion ($958.4 million), a reduction from the initial offer.
Diminished Offer Yet Increased Premium
Under the new proposal, Costa’s shareholders are set to receive A$3.20 per share for the remaining 85.16% stake that PSP does not already own. This is a reduction from the initial A$3.50 per share offer made in July. Despite the lower offer, the revised bid still represents an 8.8% premium to Costa’s last closing price.
Costa Group Holdings, prominent in the growth, packaging, and marketing of fresh fruits and vegetables in Australia, confirmed that it is deliberating on the reduced offer. The company remains in ongoing discussions with PSP regarding the terms and conditions of the proposed deal. PSP, however, did not immediately respond to requests for comment.
PSP’s Stake in Costa
PSP first acquired a 13.78% stake in Costa in October, paying A$2.60 per share. This stake was later increased to 14.84% in late March. Last month, Costa reported a decline in its half-year net profit, and projected a likely deterioration in the quality across the citrus category later in the season. This is expected to result in a A$30 million hit to the full-year earnings.
In its statement, Costa disclosed that PSP has flagged this revised offer as the "best and final price". This is the maximum at which the PSP-led consortium can deliver the proposed transaction.
Access to Costa’s Books
Following the initial offer in July, Costa granted PSP access to its books on a non-exclusive basis for a period of eight weeks. This provided PSP with a comprehensive overview of Costa’s financial status and operations.
Takeaways
This move by PSP to reduce its offer, despite having a significant stake in Costa, is indicative of the challenging market conditions that the horticulture company is currently navigating. However, the offer still presenting an increased premium is a positive sign for the shareholders. It reflects PSP’s confidence in Costa’s long-term value, notwithstanding short-term challenges. The final decision, however, lies with Costa’s shareholders, who will need to evaluate the offer against the backdrop of the company’s present circumstances and future prospects.
