An acquisition is sending Costa (ASX:CGC) shares higher

Costa Group Holdings Ltd (ASX: CGC) shares are up almost 4% after the horticultural business announced an acquisition.

Acquisition news

It was announced that Murray River Organics Pty Ltd (ASX: MRG) is going to sell 113 hectares of planted citrus and wine grapes at its Nangiloc property to a subsidiary of Costa for $4.5 million.

Coupled with surrounding vacant land, the sale comprises 390 hectares of its 3,040 Nangiloc property, effective 1 October 2020.

The final settlement of the sale is subject to registration of a plan of subdivision which is anticipated to complete in early 2021.

Costa will take responsibility for the operations and management of the parcel to be sold, including responsibility for operational costs and entitlement to the crops.

For MRO this could be an important announcement because it will help pay down debt and allow the business to focus on growth in its branded portfolio. The remaining 2,650 hectares of the Nangiloc property is the subject of a feasibility study, Project Magnum, focusing on optimum crop combinations and a potential localised desalination plant water solution.

Summary

This is a fairly small deal for Costa, but it shows that the business is looking to still grow its farm operations in Australia, which is promising. In the recent result its earnings seems to have turned around after the end of the worst part of the drought.

Costa is an interesting agricultural business with global growth aspirations. It may be able to generate decent long term returns from here. But for a ‘food’ type play I prefer other ASX growth shares like Bubs Australia Ltd (ASX: BUB).

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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