Why Australian salmon is such a tasty morsel for international buyers

Six months ago, the world’s largest meat processor, JBS, and Australia’s richest man, Andrew Forrest, got into a show-stopping brawl over the ownership of Tasmanian salmon group, Huon Aquaculture. Now, another international food behemoth, Cooke Inc is preying on Australia’s largest salmon farmer, Tassal.

Salmon is clearly protein’s new black and there is a corporate scramble to buy those producing it.

Big fish hunting: ASX-listed Tassal is on the menu for Canadian fisheries giant Cooke.Credit: Bruce Miller

Brazilian JBS’ hotly contested bid for Huon was an early foray into salmon and departure from its mainstay business, meat processing.

And just how hot is salmon right now? The latest offer puts a price tag on Tassal exceeding $1 billion. Ten years ago, when corporate sharks (including Cooke) were circling Tassal the offer was more in the order of $280 million.

And still, Tassal is playing hard to get.

The Western world’s growing obsession with eating healthier has collided with the tightening regulations around awarding new salmon fishing licences. And this is not just the case in Tasmania – there is a worldwide trend towards limiting new areas of supply thanks to concerns around the social impact of fish farming.

It is a structural characteristic of the market which will likely place some floor under salmon’s long-term price.

This has meant that it’s more appealing for the existing big international players dominated by the Norwegians and the Canadians to acquire additional volume rather than grow it organically.

And in line with Tassal’s recognition of its corporate appeal, the company is going to make Cooke fight on price to win this Tasmanian-based prize.

Tassal informed the market on Tuesday that Canada-based Cooke had tried three times to make an offer for its business-each at escalating prices.

And not even third-time has Cooke been lucky.

But the increase in each of the offers, all of which have been received over the past month, has been incremental – from $4.67 to $4.80 then $4.85 this week – the most recent of which represents a 22 per cent premium to the prevailing share price. Nothing to blow Tassal out of the water.

That message was clear in Tassal’s response to Cooke’s overtures. “The company’s board evaluated those [three] proposals and chose not to engage in relation to them,” Tassal’s statement said.

Cooke was apparently also a contender in the tussle last year for ownership of Huon, although its interest was never officially announced.

This time around Cooke is leaving less to chance having waded into the market last week and picked up more than 5 per cent of Tassal’s shares.

Getting the Tassal board to roll over will need an offer that is more compelling than Cooke’s latest attempt, and arguably it has missed its moment for opportunism.

“The company’s board evaluated those [three] proposals and chose not to engage in relation to them.”

Tassal’s statement to the ASX

On that basis, it would not be surprising to see Cooke remain in the bidding room or for its interest to flush out other interested parties that may be lurking below the surface.

While Australians have experienced first hand the increases in the price of red meat for the past year they are now witnessing the soaring price of salmon. The international price of salmon has risen by 50 per cent since the start of the year which is in part due to Norway’s inability to fly product across Ukrainian airspace.

For its part, Tassal is enjoying the stronger pricing and while it has the capacity to increase production by as much as 25 per cent, it is better able to maximise profitability at the current levels of production - of 40,000 (head off gutted) tonnes a year.

To increase volumes would be capital heavy and would require using more land-based farming methods (in ponds) or fishing further out to sea in deeper waters which is more expensive.

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