Tasmanian salmon giant Huon Aquaculture is set to sell to a Brazilian meat processing company for nearly half a billion dollars.
Late Friday, the Australian Stock Exchange (ASX) revealed that the company had entered into a deal with JBS, which would see the South American giant acquire 100 percent of Huon shares at $3.85 a share, if shareholders agree.
On Friday, Huon’s shares closed at $2.79.
The deal value was reported at $425 million – but one financial expert said the deal was likely worth $550 million.
Huon’s board of directors said the acquisition was in the best interests of shareholders, and recommended a vote in favor of the deal.
The directors, including founders and major shareholders Francis and Peter Bender, said they intended to vote to support the sale.
Benders owns a 53 percent controlling stake in the company, which is the second largest of the three salmon producers in the state, which was founded in 1986.
In a statement, JBS said the deal has been approved by the controlling shareholders and is expected to be completed by the end of this year, with the approval of other shareholders and the Australian Foreign Investment Review Board.
Billionaire mining magnate Andrew Twiggy Forest recently paid $20 million for 7.5 percent of the company’s stock, while Australian Super currently owns 12 percent.
The Huon stock acquisition would mark JBS’s transition into aquaculture, but it is the second Brazilian multinational operation in Tasmania, where the company owns a beef cattle processing unit in Longford.
JBS Australia President and CEO, Brent Eastwood, said the acquisition of Huon allows the company to further grow its Australian protein business.
“We look forward to continuing growth in our pioneering salmon business. Huon has established and works with its employees, customers and stakeholders to aid the company accomplish this next stage of growth.”
A deal worth $550 million
Shaforth’s financial advisor, Sam Baker, said the acquisition would see JBS absorb Huon Aquaculture’s debt.
“JBS, one of the world’s largest food manufacturers, will look to take control of the company and possibly provide additional financial strength.”
“They owe about $120 million, or about 43 percent of the debt, and that’s one of the significant reasons we’re going through that process right now.”
He said the deal actually values the company at about $550 million.
“The stock offer is $425 million but that also means that JBS is taking $120 million of the company’s debt and there is also a dividend in the offer.”
JBS is valued at around $16 billion.
Benders is expected to earn approximately $210 million from the deal.
Shaforth’s financial advisor, Sam Baker, said that if it went ahead, Huon would no longer be listed on the Australian Stock Exchange and financial reporting obligations would occur in Brazil.
“They won’t have to report to the Australian Stock Exchange, they will report to the Brazilian Stock Exchange, and Huon will only make up about 3 percent of the company’s whole. They probably won’t report much at all.”
Baker said Andrew Forrest bought at $2.48 a share, so if he sold to GPS, he would make about 80 percent of his investment in six weeks.
Twiggy to launch a competition bid?
Another less likely possibility, Baker said, is that Forrest will launch his own alternative show.
“Huon’s board recommended the bid, but forever with the caveat that in the absence of a superior bid,” he said.
Twiggy may now bid, although that is unlikely.
He owns 7 percent and certainly has the financial capacity.”
ASX revealed in a statement that Huon Aquaculture Group incurred a loss of just over $95 million in the six months ended December 31 final year.
She cited the impacts of COVID-19 on the global market of loss, with global demand for salmon down about 30 percent compared to the previous six months.
Conviction of sale by aquaculture control group
Environmental group Tasmanian Alliance for Sea Protection (TAMP) said it was opposed to the deal and that Tasmania should feel “ailing”.
In a statement, TAMP co-chair Peter George claimed that the Brazilian multinational would not be looking for Tasmanian workers.
George noted the problems JBS had with King Island beef producers nearly a decade ago, when the company refused to lease a unoccupied island slaughterhouse, forcing farmers to ship their cattle to the JBS slaughterhouse in Longford in the north of the state.
“The sale is useless, and communities across the state will stand together to oppose a giant multinational corporation that has already shown its conclude disregard for Tasmania and Tasmania.”