The Costa Group Holdings Ltd (ASX: CGC) share price has jumped as investors learned that a takeover deal had been agreed.
Costa is a large agricultural business that grows tomatoes, mushrooms, avocadoes, berries and citrus fruit.
Takeover agreed
Costa has agreed to enter into a takeover agreement with Paine Schwartz Partners to buy the whole business. The offer was for a Costa share price of $3.20 cash.
The PSP consortium is comprised of entities controlled by PSP, Driscoll’s and British Columbia Investment Management Corporation. PSP and Driscoll’s entities already hold a total of around 19.6% of Costa shares currently on issue.
Why did Costa agree to this?
The offer valued Costa’s equity at approximately $1.5 billion, with a 43% premium for the Costa share price to the closing price on 25 October 2022 of $2.23, which was the last day before PSP bought a 13.78% interest in Costa.
The Costa board of directors unanimously considered the offer to be in the best interests of Costa shareholders and recommended that Costa shareholders vote in favour of this takeover.
The C0sta Chairman said:
The board is committed at all times to acting in the best interests of shareholders and with this firmly in mind, carefully considered a range of factors in arriving at its recommendation. This included a number of different valuation scenarios, potential risks relating to the future execution of Costa’s business growth plan, and the price at which Costa shares could trade over the medium to longer term if it continues as an independent listed company.
Accordingly, the Costa board has unanimously recommended that Costa shareholders vote in favour of the Scheme, subject to the various customary conditions.
…While the Costa board has confidence in the long-term fundamentals of the company, the scheme provides certainty for shareholders in an uncertain operating environment by delivering cash proceeds to shareholders at an attractive premium.
Final thoughts on the Costa share price
There are still a few steps until this takeover can be actioned by the two parties, but it seems like it has a good chance of going ahead.
Shareholders will need to approve the takeover at a shareholder meeting. Assuming everything goes to plan, the takeover is expected to occur in the first quarter of 2024.
It’ll be a shame to lose it from the ASX, but if that’s what the board and shareholders want to do, then that’s good.
