The question of whether Costa will go to a private equity buyer or public offering came a step closer to being answered this week. The Costa Group IPO roadshow made its way through Australia and Asia, attracting interest at home and abroad thanks to a well executed industrial strategy focus with CEO Harry Debney at the helm, and under the guidance and control of family head Frank Costa. Goldman Sachs was marketing the deal in Asia, while UBS held meetings in Australia and New Zealand.
Interest is beginning to peak from local and international buyers, with annual sales reportedly around $900m according to a presentation given by Mr Debney, and analysts reporting to media that there is significant attraction for investors because of the amount of protected crops under Costa’s control. Debney elaborated on the successful strategy in media interviews. "About six years ago we started a major transformation. We decided the smartest thing to do was get a very concentrated focus at a large scale and really develop a lot of IP (intellectual property) and to move away from the vagaries of the weather,” he said in The Land. “We would argue that we are more of an industrial profile than an agricultural profile."
Current valuations put the 127-year-old family name business between $800m and $1bn, what the vendors are hoping to get in any final deal struck.
The unique selling point is the positioning of the Costa as a technology business, which appeals to investors because it helps circumvent some key risk concerns about agricultural businesses – namely volatile weather. It’s easy to see the appeal of a company so heavily involved in high yield indoor crops. Blueberries, for example, will yield up to 20 tonnes in a year when established, as compared to a maximum of seven to eight in the field. IBIS analyst Lisa Tonkin also explained in an interview with the ABC that European growers are also using glasshouses and protected crops widely, and the growth there was jumping over to Australia.
A large part of the Costa group’s revenue comes from 20 hectares of glasshouse produce, including six mushroom sheds. Berries, bananas, tomatoes and citrus are also sold to Coles and Woolworths, and exported to Europe and Asia.
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