Yumbah Aquaculture confirms its shellfish dominance with East 33 takeover offer

Yumbah Aquaculture, backed by billionaire Pro Medicus co-founder Anthony Hall, is doubling down on oysters with its takeover offer for East 33.

Yumbah Aquaculture has expanded its oyster operations.

Yumbah Aquaculture has doubled in size over the past couple of years and is looking to do the same again over the next three, with the acquisition of listed oyster outfit East 33 part of that ­strategy.

Chief executive David Wood joined Yumbah, backed by billionaire Pro Medicus co-founder Anthony Hall, in April 2021, and was tasked with growing it into Australia’s premier shellfish company.

That year the company bought oyster company Cameron of Tasmania to add to its abalone and mussel operations spread across South Australia and Victoria.

Yumbah had grown its Tasmanian assets organically and through the purchase of farms at St Helens, taking the Cameron business from about 300,000 dozen Pacific oysters annually to about 650,000, Mr Wood said.

Yumbah Aquaculture has doubled in size over the past couple of years and is looking to do the same again over the next three.

“And we realised that to scale up and be relevant in mussels, we did need something that gave us more market presence, so we acquired Eyre Peninsula Seafoods,’’ he said. “That transaction was completed in August last year, so we’ve had that in the business now for 12 months.

“What we now have is a business which is the largest farmer of abalone in Australia with over 50 per cent of total production; we’re the largest mussel farmer with roughly 2300-2400 tonne per year. We’re also, through the Cameron of Tasmania interests, the largest supplier of Pacific oyster spat both in South Australia and Tasmania.

“Add on to that the investment in East 33.

“The intrinsic value of Sydney rock oysters and its importance in terms of the Australian market led to that investment.’’

Yumbah currently turns over about $50m-$60m per year.

Yumbah is offering 2.2c per share for East 33, with an independent board committee unanimously recommending that shareholders accept the offer for the $16m company.

The committee points out that East 33 might run out of funding if it is not able to raise capital, and that the bid was priced at an attractive premium.

Yumbah is already a stakeholder in East 33 via both debt and equity, with a 37.5 per cent shareholding, and the smaller company has faced recent headwinds with widespread harvest area closures across northern NSW. East 33 generated $5.7m in revenue in the most recent quarter, but was cashflow negative to the tune of $926,000 and had drawn $12.5m of its $15m in available debt.

Mr Wood said like many aquaculture and agriculture businesses, East 33 was better suited to the more patient capital offered by private owners, rather than an ASX listing.

“We recognise the challenges of the business in responding both to disease issues and environmental issues. We’ve worked through those challenges before and take a longer-term view,’’ Mr Wood said. “The company really is better suited to the private landscape. It’s too small to be on the ASX and this will enable management to focus on realising value through operational turnaround.’’

Yumbah Aquaculture managing director David Wood.

Mr Wood said post-acquisition, Yumbah would examine whether growing the oyster company’s portfolio of water space made sense.

“The good thing about that business and all the businesses that we’ve invested in or acquired, they know what they’re doing, and our goal is to support their ambition,’’ he said.

Mr Wood said the Yumbah portfolio, once brought together, was “worth more than the sum of the parts’’, with benefits in areas such as marketing, distribution and management from operating together. “We’re seeing that when we talk them to customers – the ability to go in with a portfolio of product rather than single species increases your relevance,’’ he said.

“It helps them simplify their purchasing decision. That’s a key part of where we want to now focus. We think we’re pretty good at the farming side, and we’ve got the pace in terms of processing sales, but to really leverage that portfolio, we want to continue to look at the form of product that we’re taking to market, and building out the sales strategy and sales teams to do that.’’

Yumbah turns over about $50m-$60m per year not counting the revenue that would come in via East 33, and has about $180m of assets on the balance sheet, Mr Wood said.