Craig Pressler’s 2PH citrus farms sold to Costa Group for $230m

After 50 years on the land, a farming family whose crops were wiped out by disease has recovered and struck a deal to sell to Costa Group.

Citrus farmer Craig Pressler inspects his crops. Photo Adam Armstrong.

Just 15 years after a bacterial plague wiped out his entire crop, Central Queensland citrus farmer Craig Pressler is set to receive a $230m windfall after offloading their mandarin, lemon and grape growing empire 2PH farms to listed grower Costa Group.

The deal, announced on Wednesday, will see Costa conduct a $190m capital raising to fund the acquisition.

It means that Mr Pressler’s farms at Emerald and Dimbulah, which constitute the largest citrus growing operation in Northern Australia, will leave the family after more than 50 years of Pressler control.

“2PH has a long and successful history, having been started by my parents John and Pam Pressler, uncle Geoffrey Pressler and Darryl Hess some 51 years ago,” Mr Pressler said on Wednesday.

“We have invested a lot of hard work and effort into becoming the successful business we are today, which is an industry leader, with an established reputation as a breeder and grower of high-quality citrus and an iconic brand both domestically and internationally.”

It also represents a triumph for the family, who had to rebuild the business from the ground up after the 2005 citrus canker bacteria plague forced 2PH to destroy all of their orchards.

Now the business consists of 1,474 planted hectares of citrus, and 240 planted hectares of table grapes, while a further 210 hectares will be planted by 2PH at the Conaghans property

Costa will pay an upfront consideration of $200m for 2PH Farms and an additional $31m for a property named “Conaghans” in July 2023, where 2PH is currently planting a new citrus plot.

Mr Pressler said 2PH Farms and Costa had a close relationship borne out of a decade long marketing partnership.

“I know and trust Costa, and I am happy that the business will be owned and run by an Australian company which is not only an industry leader, but also has a genuine commitment to continuing to build on 2PH’s reputation for the growing and export of high-quality citrus.”

Costa will fund the $210m upfront cost of the acquisition through the capital raising and existing debt facilities.

Citrus farmer Craig Pressler inspects his crops at his farm in Emerald. Photo Adam Armstrong.

New shares equivalent to 15.8 per cent of the current securities on issue will be offered at $3 each, a 11.7 per cent discount on Costa’s last trading price of $3.40.

The members of Costa’s board have all expressed an intention to participate in the raising, the company said.

Costa Group CEO Sean Hallahan said the acquisition would provide strategic benefits for the company, with 2PH a notable citrus grower and exporter throughout Asia.

“There are a number of strategic benefits and alignments that will result from what is a financially compelling acquisition, which include greater export supply to key Asian export markets, production scale, increased variety offering, including rights to commercialise varieties with Plant Breeder Rights in certain jurisdictions, access to a proven 30-year proprietary breeding program, expanded geographic footprint and extended season timing,” he said.

Costa said 2PH is expected to generate $29m in earnings before interest, tax, depreciation and amortisation in 2021 calendar year on a pro forma basis.

It also said the deal is expected to be 10 per cent earnings per share accretive in that year, excluding the future planting at Conaghans and potential synergy benefits.

Costa also provided a trading update on Wednesday, saying it expected results for the first half of the calendar year to be “marginally ahead” of the prior comparable period.

Based on unaudited management estimates, forecast first half results are revenue of $627 million, EBITDA of $124 million and net profit after tax of $44 million.

Strong citrus yields and stabilising mushroom production levels and tomato prices will benefit the company’s bottom line, but an anticipated strong avocado crop result in WA will further add to supply, lowering prices and “resulting in a performance well below expectations,” the company said.

At this point in time Costa also predicts its full calendar year result to be “marginally ahead” of last year’s net profit after tax result of $55.1m.