Costa Group falls most in 3-weeks as Pain Schwartz lowers buyout bid

By Himanshi Akhand and Rishav Chatterjee

(Reuters) -Australia’s Costa Group on Monday said U.S. private equity firm Paine Schwartz Partners had lowered its offer price to buy the company by over A$100 million, sending shares of the country’s largest fresh produce business down 4%.

Costa, which in August reported a fall in its half-year earnings and forecast a grim outlook for its key citrus products, also told shareholders New York-based Paine Schwartz had indicated the revised offer was the “best and final” it could make but could go lower if the grocer declared a dividend.

Under the new proposal, Costa shareholders would receive A$3.20 apiece for the remaining 85.16% stake that the U.S. firm does not already own, lower than the A$3.50 apiece offer received in July. This values Costa at A$1.49 billion ($958.4 million).

Paine had paid A$2.60 a share for an almost 14% stake in Costa last October and had begun discussions for a formal buyout bid in April.

“While now at a much-reduced premium, the offer is still relatively attractive on valuation grounds,” said Angus Hewitt, equity analyst at Morningstar.

The latest offer represents a 12.7% premium to Costa’s A$2.84 closing price Monday. The company’s stock hit a week low during trading, emerging as one of the top losers on the benchmark.

Though Costa said there might be no certainty that a binding offer will be received, Morningstar’s Hewitt said the deal was likely to proceed as it still offers a 22% premium to the company’s close prior to the receipt of the original bid.

($1 = 1.5547 Australian dollars)