At time of writing, Costa Group Holdings Ltd [ASX:CGC] shares are trading at $6.79 apiece. This marks over a 10% increase from yesterday’s market price.
The jump seems to come alongside this morning’s announcement on the ASX that the company had just signed a conditional agreement to acquire Nangiloc Colignan Farm in North-West Victoria.
It looks like a positive decision for the company.
The acquisition outline
Costa is Australia’s leading horticultural company, supplying fresh produce to food retailers. They have five core categories of produce which the company focuses on maximising in growth and distribution. These are berries, mushrooms, glasshouse tomatoes, citrus and avocados.
The purchase of Nangiloc Colignan Farm is in conjunction with a subsidiary CK Life Sciences International (Holdings) Inc, a Hong Kong based biotechnology company.
The agreement involves CK Life Sciences being the acquirers of the farm and forming a 20-year lease of the farm to Costa.
Costa CEO Harry Debney says the acquisition ‘will reduce reliance on any one region in our portfolio and will also open up additional growth opportunities. In particular, with respect to Afourer mandarins and navel oranges this will allow us to further take advantage of export market demand’.
A strong focus on citrus
The Nangiloc farm has over 50 acres of both table and wine grapes as well as other citrus fruits.
Costa has put great effort over the past few years into their citrus sector, wanting to increase greenfield growth and merging and acquisition activity. Nangiloc is only one of the missions of this focus. Mr Debney also states:
‘This has been fuelled nu expanded favourable export and free trade agreements with countries including Japan, South Korea and China. In order to further capitalise on this, Costa is trialling several new mandarin, orange and lemon varieties on commercial sized blocks that have market potential with improved attributes.’
So they aren’t putting all their oranges in one basket.
What this means for Costa
The fact that Costa are looking internationally in terms of broadening their export reach is promising. China in particular have retained interest in our other food exports, especially dairy.
However, with the ongoing trade tensions that are placing strain on China, this sector of the market may be quite volatile for a while.
Keep an eye on this space for any more out-of-the-blue stock price rises.
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