On the 4th of July, Costa Group (CGC), our largest horticultural company that provides fresh produce to key Australian food retailers, received a $3.50 per share takeover offer from Paine Schwartz Partners (PSP).
I’ll take you back to our last article on Costa Group where we highlighted PSP acquiring a significant shareholding…
PSP’s timing for the takeover does look pretty good as tough farming conditions and labour shortages have completely flipped, with Costa Group now expecting strong harvesting and plenty of willing fruit pickers. So whilst it is nice to see the stock rally 27% since our BUY recommendation in November, we feel over the long- term, significant upside will be lost if the board accepts this low ball bid. Remember, Costa Group traded above $8 just a few short years ago!
Our recommendation at this stage is for existing shareholders to HOLD on hopes the board can squeeze a fair bit more out of PSP.