Australian vertically integrated fruit and vegetable grower-packer-marketer Costa Group has adjusted its expected initial public offering (IPO) to 16 times its projected annual net profit, reports the Australian.
Alongside the adjustments comes a delay in the publication of its prospectus, which has been pushed back to 25 June, as well as a delay in its road show with local investors.
The largest fruit and vegetable supplier in Australia had initially priced its IPO at 17 to 25 times its net profit, but has since dropped its IPO to 16 times its projected annual profit of A$1bn.
With a road show on the way to garner interest, Costa has repositioned itself as an industrial company with low-risk profile, rather than as a large agribusiness, with Costa CEO Harry Debney telling the Australian that its investments in covered cropping in recent years have made it a low-risk, high-yielding company.
Costa grows, distributes and exports its key produce lines – citrus, berries, tomatoes and mushrooms – with some 75 per cent of its revenue from covered crops.
“We have a very strongly defined business model a focus on investing and acquisitions in our four core categories. We are a market leader in all of these categories, and a vertically integrated grower, packer and marketer,” Debney explained. “As we go round the institutions and brokers, that is a story we are finding has real appeal.”
Founder of the group, Frank Costa, had previously told media that the group was looking to an off-market trade sale or public listing, but Debney told the Australian that while there had been keen interest from an overseas conglomerate, the deal would have taken seven to eight months to complete.
“We started transforming this company from a traditional wholesale family business five years ago to an unlisted private company with shares, and now to one about to become public,” Debney told the publication, stressing that the move to favour a public listing was not a quick decision. “I think Frank [Costa] is pleased that his company is not being sold off to a foreign buyer but will stay in Australia hands as a public company. He wants to see Costa Group retain the values and vision he has spent so long building in there.”
Costa will retain 20 per cent of the group’s shares, as will the company's US-based joint venture partner Paine & Partners, with the other 60 per cent of shares will be sold to investors and institutions when the company is listed on the Australian Stock Exchange (ASX) in July.
While two-thirds of the company’s sales are to major retailers Coles and Woolworths, the company is working on growing its exports, with an A$60m blueberry farm in Morocco, and a $24m joint venture investment in berry production in China’s south alongside US-based Driscoll’s.