Salmon producer Tassal finally hooked on Cooke’s increased $1.1b offer

Tasmanian-based salmon and prawn producer Tassal (ASX: TGR) is set for new ownership, with its board unanimously supporting a revised $1.1 billion takeover bid from Canadian seafood giant Cooke.

The parties have entered a scheme implementation deed which will see Tassal shareholders receive $5.23 cash consideration per share, an uplift of 12 per cent on Cooke’s opening offer of $4.67 on 28 June.

Both Cooke’s original offer and subsequent offers of $4.80 and $4.85 per share were rejected by the Tassal board, with the revised indicative proposal of $5.23 representing a 49 per cent premium on the undisturbed closing price of $3.52 on 22 June – the last day of trading prior to press speculation surrounding the bid.

“Today’s announcement follows a few months of constructive engagement by the Tassal board with Cooke in order to secure additional value beyond the initial approach by Cooke,” Tassal chairman James Fazzino says.

“The Tassal board believes the revised proposal reflects appropriate long-term value for the business and is unanimous in its view that the scheme is in the best interests of Tassal shareholders.”

The update on the proposed takeover comes on the same day the Atlantic salmon and Australian tiger prawns producer released its FY22 financial results.

Underpinned by increasing prices and benefiting from scale after the completion of significant infrastructure investment, Tassal announced a record cashflow of $139 million, up 128 per cent on FY21.

Increasing the production of salmon to around 40,000 tonnes per annum has helped deliver strong growth across all key financial metrics, with revenue up 33 per cent to $788.7 million and operating EBITDA up 25 per cent to $174.6 million.

The company’s bottom-line profit rose 60 per cent to $55.35 million.

“Salmon prices started FY22 in recovery mode and ended at re-rated levels, a trend we have seen both domestically and in international sales,” Tassal CEO Mark Ryan says.

“These price rises have more than offset inflation across the supply chain.

“Our prawn operations are benefiting from SmartFarming initiatives and shorter working capital cycles and deliver similar competitive advantages to those Tassal enjoys in our salmon business – with clear market leadership, biosecurity protections and nitrogen caps becoming akin to marine leases.

“Having delivered circa 5,700 tonnes over the past 12 months, we are now reaping the benefits of increasing scale as Australia’s largest prawn farmer. As Australia’s Blue AgTech leader, Tassal is focused on achieving the right balance between minimising our environmental impact and maximising our shareholder value to ensure growth is optimised and sustainable.”

Tassal remains Australia’s number one and top 15 globally ranked sustainable protein producers on the FAIRR Protein Producer Index, maintaining industry-leading compliance and certification rates across salmon and prawn operations during the year.

It has also become Australia’s largest seaweed farmer, with about 3,300 tonnes of seaweed grown to date and an estimated 22 tonnes of nitrogen removed from prawn ponds.

“We believe in sustainably produced food and in responsibly harnessing our precious water resources,” Ryan says.

“Our responsible business blueprint sets out how we will do this to ensure a prosperous, healthy planet for future generations. Combining our two companies’ people-first cultures and our shared passion for producing top-quality seafood is a natural fit.

“A future acquisition by Cooke enables Tassal to fast-track our goal to be one of the world’s most transparent and sustainable protein producers.”

The scheme is not subject to any financing or due diligence conditions. Cooke, which has already acquired roughly 10.5 per cent shares in Tassal, has advised that it has already obtained Foreign Investment Review Board approval.

With the scheme meeting set to be held in November, the agreement's implementation is due to take place before the end of 2022 for an enterprise value of $1.7 billion, assuming no final dividend is declared and paid for FY22.

Tassal will be required to pay a break fee of $11 million to Cooke in the event the deal doesn’t go through.

Cooke has a global workforce of over 10,000 employees in 10 countries and harvests and sells 30 per cent wild seafood and 70 per cent farmed seafood under international and Canadian aquaculture divisions.

It is well versed in the Australian seafood market. It has pursued Tassal for years and conducted due diligence on fellow Tasmanian salmon group Huon Aquaculture in 2021 before its sale to Brazilian meat giant JBS for $425 million.