After receiving an attractive takeover offer, the Costa Group Holdings Ltd (ASX: CGC) share price has jumped 11%.
Costa is the largest horticultural business in Australia. It grows berries, mushrooms, tomatoes, citrus and avocados. The business has over 7,200 planted hectares of farmland, 40 hectares of glasshouse facilities and three mushroom-growing facilities.
Takeover offer for Costa shares
Costa revealed today that on 31 May 2023, it received a non-binding offer from Paine Schwartz Partners (PSP) to buy the whole business.
Under the offer, Costa shareholders would receive $3.50 cash per share, and also be entitled to any interim dividend declared for the six-month period to 2 July 2023.
After a four-week period of initial due diligence, PSP reconfirmed its indicative proposal on 4 July 2023.
PSP bought a 13.78% interest in Costa on 25 October 2022 at a price of $2.60 per share. Subsequent verbal “engagement” between Costa and PSP in April in relation to a potential approach at a range of between $3.20 per share and $3.30 per share.
The cash offer would represent a 34.6% premium to the $2.60 share price when PSP bought the 13.78% stake.
Not a done deal
Costa noted that the indicative proposal is still subject to a number of conditions, including completing satisfactory due diligence.
The Costa board talked about the offer with its financial and legal advisers and granted an eight-week period of non-exclusive due diligence for PSP to decide whether to put forward a binding proposal.
There has been media speculation that Costa and PSP were hopeful of an agreed deal in the coming days, but further due diligence and negotiations on a potential deal are expected to “continue through July”.
The ASX share noted that “there is no certainty that the indicative proposal will result in a binding offer or that any transaction will eventuate.”
Costa shareholders don’t need to take any action, according to the company. The market will continue to be informed of any developments.
Final thoughts on the Costa share price
I’d understand if Costa shareholders wanted to sell out now, to lock in the recovered price. But, there’s still 6% between the current price and the offer price. Plus, there could be another offer from somewhere else to compete with PSP’s offer.
It’d be a shame to lose Costa from the ASX, but it’s the sort of business that would do better without the intense scrutiny and expectations of good results every year.
