Australia’s Largest Horticulture Producer, Costa Group, Eyes IPO; Shutters Two Grape Farms
AUSTRALIA - Costa Group is seeking an initial public offering in the first half of 2015 that could result in a total enterprise value of anywhere from $800 million to $1 billion.
"We don't have what I would consider the correct strength in the family coming on to take over such a big organization now," said Frank Costa, Chairman of Costa Group, according to Australian Broadcasting Corporation News (ABC News). "So you've got a decision to make and it's best to make it when you're in control and you're still able to do things as required and we think the timing is pretty good right now.”
Costa Group has appointed both Goldman Sachs and UBS as joint lead managers on the deal. The IPO plan would aim to raise between AU$300 million and AU$600 million, for a total enterprise value of between AU$800 million and AU$1 billion, according to the Sydney Business Herald. The final size, valuation, and capital structure will depend on the holding retained by current shareholders, which is still being considered.
On the heels of this announcement, the company has also decided to close two of its Australian grape farms, ABC News reports.
Chairman of the Australian Table Grape Association, Richard Lomman, said it will be a huge blow for both communities. Oversupply of grapes have caused them to be advertised for as low as AU$2 per kilo in the major supermarkets, a price Lomman claimed was below the cost of production for most growers. Lomman added that the wide range of summer fruit available this season has made it difficult for grape growers to compete.
"The whole idea of being in these early regions is to get a lucrative domestic market traditionally, but that's not the case anymore,” says Lomman.
Several Australian agricultural companies have been sold to overseas investors in recent years, including the takeover of Warrnambool Cheese and Butter by Canadian firm Saputo last year and earlier deals for the likes of Manassen Foods and CSR's Sugar business.
"We've been in it a long time and I've enjoyed every moment of it," Costa said. "It is a very challenging industry both from a demand and supply structure, where you have to be careful not to grow too much and oversupply the market, and in terms of supply to the big retailers. It certainly keeps you on your toes."
He said the decision for the IPO was the right one, but he would miss being involved with a business that has been as much fun as it has been work.