Vegetable grower Costa taken over in discounted $1.5bn deal

Costa Group shareholders have overwhelmingly backed a discounted $1.5bn takeover bid from a consortium led by international agriculture investor PSP.

A Costa fruit picker pictured at the company's Murtho citrus orchard. Picture: Tom Huntley

Vegetable grower Costa Group’s time as a public company will shortly be up after its shareholders voted overwhelmingly to accept a discounted $1.5bn takeover offer from a consortium led by international agriculture investor PSP.

More than 98 per cent of votes cast at a scheme meeting on Tuesday fell in favour of the takeover, which was pitched by New York-based PSP, berry company Driscoll’s and British Columbia Investment Management Corporation.

Costa initially received a non-binding $3.50 per share offer from PSP in July, 2023, however reduced this to $3.20, the reduction equivalent to about $100m, after Costa revealed in August it would take a $30m hit in its full-year results because of poor weather conditions.

Costa’s board unanimously backed the PSP offer, which came in towards the upper end of an independent expert’s valuation of the company, which suggested a range of $2.62 to $3.28 per share.

Costa chair Neil Chatfield told the meeting on Tuesday “The all cash consideration provides Costa shareholders certainty in an uncertain operating environment at an attractive premium by delivering 100 per cent cash proceeds to Costa shareholders’’.

“Implementation of the scheme would mean that Costa shareholders would no longer be exposed to the current and future risks relating to the ongoing execution of Costa’s business

growth plan,’’ he said.

“I also think it is appropriate to recognise the undoubted experience and commitment each member of the consortium has with respect to investing in agriculture and especially fresh produce.

“PSP have a long and established record investing in the agricultural and the food supply chain, which includes Costa.

“Over the past few decades, they have invested $5.7bn in food and agriculture. This includes not only companies that grow produce, such as Monterey Mushrooms, but also ag tech companies, such as Agro Fresh, which is a global leader in providing pre and post-harvest solutions, technologies and services to enhance the quality and extend the shelf life of fresh produce.

“Driscoll’s are of course well known to Costa and been longstanding joint venture partners here in Australia and in China.

“Driscoll’s are a leading global breeder and marketer of fresh berries. They would bring considerable knowledge and resources to the business, and the capability to potentially

further the expansion of Costa’s global footprint.’’

PSP, formerly known as Paine & Partners, has a long history with Costa, at one point holding a 54 per cent stake in the business before it was listed in 2015 at $2.25 per share.

Paine & Partners founder and president Kevin Schwartz also had a seat on the Costa board on listing.

Costa is Australia’s leading grower, packer and marketer of fresh fruit and vegetables.

It operates mainly in five core categories: berries, mushrooms, glasshouse tomatoes, citrus and avocados.

Costa’s operations include 7200 planted hectares of farmland, 40ha of glasshouse facilities and three mushroom growing facilities across Australia.

Costa also has strategic foreign interests, with majority-owned joint ventures covering six blueberry farms in Morocco and four berry farms in China, ­covering about 750 planted hectares.

Costa shares were trading at just $2.23 prior to PSP acquiring an initial 14 per cent interest in the company in October last year, at $2.60 a share.

The deal is subject to Foreign Investment Review Board approval which is expected to be received by February 6, with Costa shares to be delisted from the ASX on February 8 subject to that approval.

Costa shares closed up 1c, or 0.3 per cent on Tuesday at $3.18 each, giving it a market capitalisation of $1.48bn.