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AU: Costa family considers IPO

Frank Costa flags overseas sale for Costa Group

Frank Costa says his Costa Group could be the latest agricultural company to be sold to overseas interests, after Australia’s largest grower and distributor of fruit and vegetables confirmed it is up for sale.

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As exclusively revealed by Street Talk on Wednesday, Costa Group will pursue an initial public offering in the first half of the year that could result in an enterprise value of $800 million to $1 billion.
Mr Costa told Fairfax Media that the group, which is half owned by US private equity firm Paine & Partners, is also considering a trade sale.

“My preference is for a trade sale but we are also looking at a stockmarket float, which would obviously keep it here in Australia,” the BRW Rich Lister said. “But if it was a sale, yes, I would think that the buy would most probably come from overseas, given the size of the company.”

Street Talk revealed Costa Group has appointed Goldman Sachs and UBS as joint lead managers on the deal. The IPO plan would seek to raise between $300 million and $600 million for an enterprise value of between $800 million and $1 billion.

The final size, valuation and capital structure depends on the holding retained by current shareholders, which is still under consideration, sources said.

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.

Mr Costa said the pending deal was planned after the sale of half the business to Paine & Partners in 2011. “We had a plan then for a sale within five years and that time is coming up. Myself and my brothers are in our 70s, save for the youngest one who is in his 60s. And we haven’t seen one individual really emerge from the rest of the family to take control of the business, which is why we sold half to Paine & Partners four years ago and then went with a corporate management structure.”

Costa is the biggest supplier of fresh food to Coles and Woolworths, with about 20 per cent of product shipped overseas. Mr Costa said exports have increased in recent years with the establishment of farms in Morocco several years ago and China last year.

“We’ve certainly been looking at growing more overseas, and taking our nous and people over there to do so,” he said. “There is a lot more demand coming from Asia for good clean green food and not just from a growing population point of view but also their growing economic power as well.”

Mr Costa, a former president of AFL club Geelong, and his family were valued at $295 million on last year’s BRW Rich List. His great-uncle established the Geelong Covent Garden in 1888 — a produce grocery which he ran until the 1920s, at which time he turned it over to Costa’s father.

“We’ve been in it a long time and I’ve enjoyed every moment of it,” Mr 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.”

Source: http://www.smh.com.au/business/retail/frank-costa-flags-overseas-sale-for-costa-group-20150122-12vjwl.html