Daily Brief Australia: Costa Group Holdings, Boss Resources, Challenger Ltd and more

In today’s briefing:

Costa Group (CGC AU): Paine Schwartz’s Final Proposal Poses a Dilemma
S&P/ASX Index Rebalance Preview: Changes from Now to December
Challenger (CGF AU) – Bank Sale 1H24 | ROC Highest in 23 Yrs | 85% Market Share Annuity FUM

Costa Group (CGC AU): Paine Schwartz’s Final Proposal Poses a Dilemma

Costa Group Holdings (CGC AU) has disclosed a revised non-binding indicative proposal from Paine Schwartz Partners at A$3.20 per share, 9.6% lower than the previous offer on a like-for-like basis.
The weak CY23 outlook impacted the debt that could be taken on to meet the IRR hurdles of the previous offer. The revised offer is the best and final offer.
The Board faces a dilemma as the offer is light, but some shareholders will want the Board to accept as trading volatility making Costa more suited to the private market.

Privatisations could lead to two/three S&P/ASX 200 (AS51 INDEX) constituents being delisted in October/November and that means ad hoc inclusions to maintain the number of constituents at 200.
Then there could be one change for the S&P/ASX 20 Index and two changes for the S&P/ASX 200 (AS51 INDEX) at the regular rebalance in December.
The impact on the potential adds/deletes for the S&P/ASX 200 (AS51 INDEX) is high at between 7.5-23 days of ADV to trade from passive trackers.

During 1H24 CGF expects to sell its bank for ~AUD36m which could include a AUD11m gain and allow to free-up bank capital of around AUD40-50m.
Return on capital is now at the highest it has been since FY10 at 6.2% with a substantial 160bps increase in normalized ROE in 2H23 YoY to 13.1%
85% market share of annuity FUM from 50% about 10 years ago, operating in system with strong forced savings in superannution funds now at AUD3.5tr up 91% over 10 yrs.

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