Cobram Estate (ASX:CBO) Surges 21% on US Acquisition: Time to Buy?

Cobram Estate expands in the US after the California Olive Ranch deal

Cobram Estate (ASX: CBO) surged over 21% on Monday, hitting an all-time high of A$3.96 before closing at A$3.95. While the US$173.5 million acquisition of California Olive Ranch was announced on Christmas Eve, Monday’s move reflects the market’s first full trading session to digest the deal, further catalysed by a ‘Buy’ upgrade from Ord Minnett.

We believe this acquisition fundamentally changes Cobram’s growth trajectory. By becoming America’s dominant integrated olive oil producer, the company has positioned itself at the heart of one of the fastest-growing premium food markets. For long-term investors, this looks like a compelling opportunity.

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Cobram Estate Targets US Market Leadership With California Olive Ranch Deal

The deal structure reveals management’s confidence. Of the US$173.5 million consideration, Cobram Estate is paying US$88.5 million in cash, issuing US$70 million in vendor notes, and a US$15 million earn-out. This preserves balance sheet flexibility while aligning incentives with sellers.

What makes this strategically compelling is the immediate scale. Cobram’s California grove footprint more than doubles overnight, and California Olive Ranch brings premium brands with an established customer base. Management expects circa 9% earnings per share accretion from FY27, with synergies of US$12 million expected in FY27, ramping to over US$20 million annually by FY30.

Here’s the key insight: Cobram Estate isn’t buying a turnaround project. It’s acquiring a profitable market leader to accelerate growth in a market where it already has momentum.

Why Cobram’s US Expansion Could Justify a Premium Valuation

The US olive oil market is growing at a CAGR of 8.14% and is expected to reach US$6.04 billion by 2033. What makes this opportunity particularly attractive is that domestic producers now enjoy structural advantages.

The 15% tariff on EU olive oil imports, agreed in August 2025, significantly improves the competitive position of US-based producers. Since America imports approximately 95% of its olive oil, domestic producers like Cobram Estate can capture share while competitors face rising costs. This isn’t a short-term bump; it’s a lasting tailwind.

Cobram’s FY25 results demonstrated execution capability. EBITDA surged 75% to A$116.6 million, while operating cash flow hit a record A$83 million. The company successfully implemented a 15% price increase in the US while maintaining volume growth, proving genuine pricing power. For a consumer products company, this combination is the holy grail.

The Investor’s Takeaway

At approximately 35 times earnings (P/E 34.78) and with the share price hitting a new high of A$3.96 on Monday, Cobram Estate is no longer a value play; it is a momentum and high-growth story. While the stock has blown past old analyst targets of A$3.20 to A$3.50, the market is clearly re-rating the company based on its new status as a US market leader. The stock has already more than doubled over the past year, and near-term upside appears limited based on the current consensus.

However, we believe long-term investors can justify buying here. The combination of a premium brand, expanding US operations, and tariff protection creates a rare quality-growth profile on the ASX. This acquisition transforms Cobram from a promising player into America’s dominant olive oil producer.

The key risks include integration execution and elevated water prices in Australia, which are expected to impact 1H FY26 EBITDA by A$7m-A$10m. Global olive oil prices have fallen approximately 50% from peaks, which could pressure margins. Customer concentration in Australia remains a structural concern.

Our bottom line: for growth-oriented investors with a multi-year horizon, Cobram Estate offers a compelling opportunity at a premium but justifiable valuation. More conservative investors may prefer waiting for a pullback, given the extended run. Either way, this acquisition marks a strategic inflection point for sustained growth.