Costa shares fall as takeover bid gets $139 million trim

Costa has received a best and final takeover approach at a lower price.

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Costa Group Holdings Ltd (ASX: CGC) shares are having a tough start to the week.

At the time of writing, the horticulture company's shares are down almost 4% to $2.83.

Why are Costa shares taking a hit?

Investors have soured on the company today after it released an update on its takeover approach from Paine Schwartz Partners (PSP).

As you may be aware, in July PSP tabled a non-binding $3.50 per share takeover offer for Costa. This was enough to give the private equity firm due diligence access.

However, last month, Costa released a pretty dismal trading update. It warned that there had been a deterioration in the outlook for later season quality across its citrus category with an earnings impact of approximately $30 million.

In light of this, it stated the following:

[PSP] has been advised of the latest trading conditions as part of due diligence. While it remains uncertain if a transaction with PSP will eventuate and at what price, discussions with PSP are continuing. We expect to be able to provide an update in relation to the transaction in mid/late September.

What's the latest?

Today's update reveals that PSP remains keen to acquire Costa. However, not at the original price that was offered.

According to the release, the private equity firm has put forward a revised non-binding offer of $3.20 per share, less any permitted dividend of up to 4 cents per share. This shaves $139 million from its original offer and values Costa at just under $1.5 billion.

It has also indicated that this offer is the best and final price at which the PSP-led consortium can deliver the proposed transaction.

Costa has responded to the news, stating:

The Costa Board, together with its financial and legal advisers, is considering the revised non-binding offer and is continuing to engage with PSP regarding the terms and conditions of the offer to enable the Costa Board to comprehensively assess whether the revised non-binding offer is in the best interest of shareholders. There continues to be no certainty that a binding offer will be received or that any transaction will eventuate. Costa shareholders do not need to take any action at this time.

Motley Fool contributor James Mickleboro 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 has recommended Costa Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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