Paine Schwartz Partners back for a second bite of Costa
Things are finally moving at Australia’s biggest horticultural company.
Street Talk understands New York private equity firm Paine Schwartz Partners will announce a revised takeover bid for Costa Group on Monday. It is unclear what the new price will be but considering Costa issued a profit warning last month, expectations are it will fall below the previous bid.
Costa Group has warned the quality of its citrus produce has taken a dive following “adverse weather”. Darren Seiler
The initial tilt was revealed by this column in early July. Costa later confirmed it had received a takeover offer from Paine pitched at $3.50 a share at the end of May.
Its shares jumped almost 12 per cent to $3.31 on the announcement but have since fallen back to $2.94. Weighing on its share price was the release of unaudited earnings results in late August, falling right in the middle of PSP’s due diligence and casting doubt over whether the deal would proceed.
The $1.37 billion company reported a worsening outlook, saying 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 weighed on the delayed full-year result which saw Costa’s net profit after tax fall 6.2 per cent to $37.8 million. Revenue grew by more than $60 million to $770.7 million, but it faced higher packaging, fertiliser and labour costs. Management guided that its calendar year EBITDA is expected to be ahead of the CY22 result.
Macquarie Bank equity analysts said the disappointing full-year commentary was “not ideal” in
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