Costa Group has launched a $190 million raising to fund the bulk of its circa $231 million acquisition of central Queensland-based citrus grower 2PH Farms and a parcel of land with a new citrus crop.
Costa will pay the $31 million fee for the citrus property, named Conaghans, in July of 2023, where 2PH is currently planting a new crop spanning 210 hectares.
2PH currently has 1,474 hectares of citrus planted, and 240 hectares of table grapes.
“There are a number of strategic benefits and alignments that will result from what is a financially compelling acquisition, which include greater export supply to key Asian export markets, production scale, increased variety offering, including rights to commercialise varieties with plant breeder rights in certain jurisdictions, access to a proven 30-year proprietary breeding program, expanded geographic footprint and extended season timing,” Sean Hallahan, Costa Group CEO said.
The 2PH tree age profile consists of a majority of plantings that are yet to reach maturity (eight years) while half of the plantings are under five years old. Based on this, maturity annual yield is forecast to increase from an expected circa 30,000 tonnes in CY21 to circa 60,000 plus tonnes by CY25.
The 2PH farms are supported by large holdings of high and medium permanent water allocations of 11,000 megalitres-plus from Fairbairn Dam in the Nogoa Mackenzie scheme and on-farm water storage capacity of 4,000 megalitres.
Excess water requirements are sourced from purchases on the temporary water market.
Costa expects the transaction be around 10% EPS accretive on a pro forma basis for the 2021 calendar year, excluding future plantings at Conaghans and potential synergy benefits.
2PH is expected to generate circa $29 million in EBITDA in CY21 on a pro forma basis.
Costa has an established relationship with 2PH, having marketed 2PH citrus for over 10 years in the Australian domestic market and both the domestic and export markets this calendar year 2021.
2PH was started by current owner Craig Pressler’s parents, John and Pam Pressler, uncle Geoffrey Pressler and Darryl Hess 51 years ago.
“We have invested a lot of hard work and effort into becoming the successful business we are today, which is an industry leader, with an established reputation as a breeder and grower of high-quality citrus and an iconic brand both domestically and internationally,” he said.
Costa’s total upfront funding requirement is approximately $219 million, including stamp duty and transaction costs, and is to be funded with the proceeds of a fully underwritten 1 for 6.33 pro-rata accelerated renounceable entitlement offer with retail rights trading to raise $190 million and existing debt facilities.
It was priced at $3 per share, a 10.3% discount to its last close.
