Costa Group the ‘pick of the bunch’ ahead of impending IPO
As private equity firms move in on ripe Australian vegetable growers, the Costa Group received the spotlight ahead of its impending IPO.
According to research firm IBISWorld, the under-cover vegetable growing industry has become an attractive proposition for international private equity firms looking to maximise returns for their investors.
The industry generates over $500 million in annual revenue through more than 700 Australian companies, and is expected to grow by 2.0% per annum over the five years through 2014-15. As a result, private equity firms have expressed interest in some of Australia’s major horticulture companies.
Major under-cover vegetable growers have capitalised on year-round demand for reliable sources of fresh produce. In 2013, Chevalier International Holdings acquired Moraitis Group. Further acquisitions by foreign private equity firms are expected, with Costa Group expected to pursue an initial public offering in 2015.
Costa Group is a major grower and wholesaler of fruits and vegetables, and the biggest supplier of fresh food to Coles and Woolworths. Costa generated revenue of $711 million in 2013-14. The company is a significant player in the under-cover vegetable growing industry, contributing an estimated 27.0% of industry revenue in 2014-15.
IBISWorld said that it expected Costa’s under-cover vegetable growing segment to grow by 6.8% per annum over the five years through 2014-15, to reach revenue of $138.1 million, driven in part by the acquisition of smaller operators such as Adelaide Mushrooms in 2013. Although the company operated at a loss over the three years through 2013-14, private equity firms still see it as a worthwhile investment, with sale rumours attracting the interest of Kohlberg Kravis Roberts and Champ Private Equity.
Goldman Sachs and UBS are reported to be readying pre-offer reports and marketing collateral in anticipation of Costa’s float next month.
