Macquarie sweetens offer for Vitalharvest

Macquarie’s agriculture fund has improved its offer for the Vitalharvest Freehold Trust. Here are the details.

Vitalharvest Freehold Trust leases its seven horticultural properties to Costa Group.

MACQUARIE Infrastructure and Real Assets has sweetened its bid for orchard owner Vitalharvest Freehold Trust by 2.5 cents a share.

In November, Macquarie’s agricultural fund offered $300 million for the horticultural property trust that owns four berry and three citrus properties across New South Wales, Tasmania and South Australia, all leased to Costa Group.

The deal involved acquiring all units in the trust for $1 a share by way of a trust scheme, or if that failed to attract enough support among shareholders, buying the assets for $300 million.

Vitalharvest’s responsible entity Perpetual recommended shareholders vote in favour of the trust scheme subject to an independent expert determining it was a fair and reasonable offer and in the best interests of shareholders.

Primewest Management, which currently manages the Vitalharvest property fund and owns a 19.87 per cent stake in the trust, also lent its support to the offer, pledging to vote in favour of the deal in the absence of a better deal.

But last month, Investors Mutual, which owns 3.6 per cent of the stock, wrote to Perpetual seeking more information around the bid, and why it supported the deal when current twice-yearly payment distributions to unitholders were excluded and given an independent expert report is yet to be released.

MIRA’s announcement this week that it would pay a 2.5 cent half-year distribution follows months of negotiations with Perpetual.

Investors Mutual portfolio manager Marc Whittaker said the inclusion of the 2.5 cents a unit distribution payment gave the fund manager some comfort.

“We’re (now) more positively disposed towards the bid with some sort of distribution,” Mr Whittaker said.

“A dollar was underselling the trust and the bidder was retaining those (distribution) monies, which meant the bid was well below a dollar.”

The payment bumps up the offer to $1.025 a share. Shares in the trust closed at $0.99 yesterday following Macquarie’s latest offer.

Vitalharvest was listed on the Australian Securities Exchange in June 2018 for $1 a unit, with its seven properties valued at $238.4 million by CBRE in May of that year.

The investment model is based on a base rental return and a variable rent component based on a profit share of Costa’s earnings from the properties.

David Williams, founder of corporate advisory firm Kidder Williams and a significant investor, described MIRA’s bid as “very thin”, given the value of the profit share component in the lease arrangement with Costa.

An explanatory memorandum is to be distributed to shareholders in coming weeks detailing the offer while a meeting will be held before March 15 to implement the scheme or complete the asset sale if approved by shareholders.

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