Costa profit warning casts doubt over takeover deal
A Costa Group profit warning has cast more doubt over whether a New York private equity firm will push ahead with a takeover offer pitched at $3.50 a share.
Shares in Australia’s biggest horticultural company plunged almost 12 per cent to $2.92 in early trading after it released unaudited earnings results.
Costa said on Thursday that earnings before interest, tax, depreciation, amortisation and fair value movements in biological assets would be about $150 million.
It also expects to take a $30 million hit from a deterioration in late-season quality across its citrus business and also pointed to weaker consumer demand for tomatoes.
Both factors will weigh on the full-year results, but Costa said it expected higher earnings than the $214.8 million it reported last year when its operations were hit by adverse weather conditions.
Takeover suitor Paine Schwartz Partners had been told about the latest trading conditions as part of due diligence.
Costa said it remained uncertain if a takeover would proceed and at what price as it continued talks with Paine.
Paine, which floated Costa in 2015, acquired an almost 14 per cent stake in Costa last October at $2.60 a share, and started talks in April about a takeover offer in the range of $3.20 to $3.30 a share.
It followed up with a confidential and non-binding proposal at $3.50 a share on May 31 that valued Costa at $1.6 billion.
The Costa board eventually granted Paine non-exclusive due diligence in early July for talks about a potential deal that left the door open for shareholders to pocket any interim dividend up to 4¢ per share.
Costa hinted at the time that any offer from Paine could involve an investment partner.
Paine is understood to have Foreign Investment Review Board
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