The Costa Group Holdings Ltd (ASX: CGC) share price has fallen 3% after the takeover offer was reduced.
Costa is one of the largest fresh produce growers in Australia – it grows berries, mushrooms, tomatoes, citrus fruit and avocadoes. Its operations include over 7,200 hectares of farmland, 40 hectares of glasshouse facilities and three mushroom-growing facilities.
Costa Group Holdings share price
The business also has majority-owned joint ventures with six blueberry farms in Morocco and four berry farms in China, covering approximately 750 planted hectares.
Costa share price sours
Earlier this year in early July, Paine Schwartz Partners (PSP) launched a bid for Costa. The last that investors heard was that the non-binding offer was $3.50 per share, reduced for any permitted dividend of up to $0.04 per share.
However, today it was announced that PSP has put forward a revised non-binding offer of $3.20 per share, reduced by any permitted dividend of up to $0.04 per share, if declared. This offer was put forward to 16 September 2023.
PSP has indicated that this offer is the “best and final price” at which PSP can deliver the proposed transaction.
Board response
The Costa board, together with its financial and legal advisers, is considering this revised, lower non-binding offer and “is continuing to engage with PSP regarding the terms and conditions of the offer” so that it can assess whether this is in the best interest of shareholders.
Costa noted that there continues to be no certainty that a binding offer will be received, or that any transaction will happen. The board noted that shareholders don’t need to take any action at this time.
It will continue to keep the market informed in accordance with its continuous disclosure obligations.
Final thoughts on the Costa share price
Profitability has continued to suffer at the business, with FY23 half-year showing underlying net profit was down 6.2% to $37.8 million and reported net profit after tax down 32%.
The current offer price is 12% higher than the current valuation, so the market doesn’t seem convinced that a deal will happen.
This could be a decent contrarian opportunity, both from a low share price point of view (compared to prior years), and a possible takeover going ahead.
However, I can think of plenty of ASX growth shares that I think have more long-term return potential.
