Macquarie Infrastructure and Real Assets’ $300 million offer for the listed horticultural land owner Vitalharvest Freehold Trust is expected to be given the green light by its key tenant, the Costa Group.
On Monday, MIRA announced it had offered $1 per unit by way of a scheme of arrangement for Vitalharvest, just days after Macquarie Group chief executive Shemaqra Wikramanayake signalled acquisitions were on the agenda for the Australian listed financial, which has a $9bn war chest.
Should a majority of the 75 per cent of shareholder votes cast not be in favour for the scheme, MIRA is offering to buy all of the Vitalharvest assets for $300m.
This also works out as $1 per unit, an 11.8 per cent premium to Vitalharvest’s current adjusted net asset value of 89.4c per unit and a 7 per cent premium to the asset values at June 30
Costa leases seven farms from Vitalharvest, including three citrus farms in South Australia and four berry farms, two of which are in NSW and another two in Tasmania.
The thinking among some is that Costa will be eager to find a new landlord when its lease soon comes up for expiry due to the current arrnagements it has in place with Vitalharvest.
Demand for citrus is booming due to the export market, as is demand for berries, and Costa has to pay out about 25 per cent of its profits to Vitalharvest.
Some suspect that MIRA, which has strong expertise in operating horticultural assets, has been given Costa’s blessing for its latest bid and said publicly it was confident it could gain fixed least terms from MIRA.
Costa and MIRA are already well known to each other.
MIRA has an Australian-based agricultural arm that also owns horticultural land leased to Costa for crops such as avocados.
Much of whether it suceeds in its Vitalharvest bid could depend on office landlord Primewest, which this year bought the Vitalharvest mangaement rights for about $10m and controls a stake of close to 19 per cent.
Primewest diversified into agricultural land and may be keen to maintain exposure at a time that central city office rents could be under threat due to the COVID-19 pandemic.
The Vitalharvest leases are fixed for at least the medium term and provide a stable income stream.
Such investments are coming into favour by investors looking for defensive assets amid the global health pandemic.
Vitalharvest comprises the properties that were previously part of the Costa Group before the fruit and vegetable grower was listed in 2015.
The properties that were held by the Costa family were then listed in 2018 with a market value of about $185m.
The offer by MIRA is a 27.4 per cent premium to the company’s last closing unit price of 78.5c.
Its market value before the announced bid was $145.2m.
MIRA intends to seek the support of Perpetual as Responsible Entity of Vitalharvest Freehold Trust for its offer.
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