Costa (ASX:CGC) share price dips on opening of retail entitlement offer

Costa is looking to add more shares to its registry.

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disappointed woman farmer at the decline of share price

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The Costa Group Holdings Ltd (ASX: CGC) share price is edging lower during mid-morning trade. This comes after the horticulture company provided investors with its retail entitlement offer information booklet today.

At the time of writing, Costa shares are fetching for $3.26 apiece, down 0.61%.

Costa begins retail entitlement offer

Investors appear mixed on the company’s latest update to the ASX, sending Costa shares slightly lower.

According to its release, Costa announced its pro rata accelerated renounceable entitlement offer has proceeded as planned.

The retail component will see up to 1 share issued for every 6.33 Costa shares owned to eligible shareholders. Listed at an offer price of $3 apiece, the company is hoping to raise gross proceeds of $76 million. This follows the successfully completed Institutional Entitlement Offer which received $114 million in late June. Together, Costa is aiming to raise $190 million from both offers.

Approximately 63 million shares will be created in the retail entitlement offer, representing 15.8% of the existing shares on issue.

The closing date for the retail offer IS on 19 July 2021. The record date has already surpassed (28 June 2021) if you were hoping to be getting in on the action.

Costa is seeking to build up its balance sheet to partly fund the acquisition of the business and assets of 2PH Farms. In addition, the company will pay an upfront cash consideration of roughly $200 million for a Central Queensland based citrus grower.

Costa believes that the purchase will further strengthen its citrus offering, opening greater export supply channels to Asian export markets. Production scale and geographical spread are expected to increase, with the company’s citrus growing regions increasing from two to three.

About the Costa share price

For the past year until late May, the Costa share price was rebound from its COVID-19 lows, moving on an upwards trajectory. However, since the release of its Annual General Meeting (AGM) on 27 May, Costa shares tumbled severely.

When looking at year-to-date alone, the company’s shares are down almost 20%.

Costa presides a market capitalisation of about $1.3 billion, with approximately 401 million shares on its books.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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