Private Equity Firm to Retain Stake in Costa Group After IPO


June 22, 2015


Fruit and vegetable group and supplier, Costa Group, is heading towards an initial public offering within the next month. The company, which is Australia’s biggest in the sector, is expected to offer around 60% of its shares as part of the listing. Private equity firm Paine & Partners is reportedly going to hold on to a 20% stake in the company, even after the listing.


The Reports


The prospectus for the IPO will be announced today, with the listing estimated to raise around $600 million. The Australian company is set to list on the Australian Stock Exchange sometime next month.


According to the Australian, the company is most likely going to offer around 60% of its shares to institutions and new investors. The IPO plans were announced last month and at the time, rumours were suggesting the listing had caused a rift between the Costa family and the US-based private equity firm.


According to reports, the private equity firm wanted to float the company in order to extract cash and exit from the firm. The company’s founder Frank Costa, on the other hand, was more in favour of an off-market trade sale.


Overseas Interest


Despite some rumours suggesting the company wasn’t able to attract any interest for a sale, Harry Debney, the chief executive of Costa, said the company did have an attractive offer from a foreign conglomerate.


According to Mr Debney, listing would be a more stable option for the company. Furthermore, Mr Debney said, “And I think Frank (Costa) is pleased that his company is not being sold off to a foreign buyer but will stay in Australian hands as a public company.”


Private Equity Involvement


Paine & Partners got involved with the company in 2011 when it set up the structured private company on a 50/50 ownership basis. At the time, Paine & Partners’ Kevin Schwartz said, “We look forward to supporting Costa’s long-term business goals and working with management to realise its potential to create new market opportunities for the company, its employees and its customers.”


Indeed, the company has recently put its efforts into maintaining its market leadership in four key categories of citrus, berries, truss tomatoes and mushrooms. It currently provides 42% of Australia’s mushrooms, for example.


But the company is now targeting foreign markets as well. Its exports currently only account to 10% of the revenue and it has announced plans to build a farm in Morocco as well as China.


Private Equity Firm Wants to Stay


According to the most recent reports surrounding the IPO, it is likely the private equity firm won’t make a complete exit from the company. It will hold on to 20% stake, with Frank Costa also deciding not to sell his 20% share.


The private equity firm is still expected to make a good amount of cash with the IPO. Especially as it is expected, the IPO is set at 18 to 25 times the company’s current net profit.


It will be interesting to see whether the listing will generate more twist and turns in the coming weeks.

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