A fierce battle is expected to emerge for Huon Aquaculture should the Foreign Investment Review Board knock back an agreed deal by Brazilian meat processing firm JBS to buy the Tasmanian salmon producer.
However, parties are not expected to offer anything like the $3.85 per share that JBS has agreed to pay for Huon, a price that takes its market value to $425m.
DataRoom can reveal that the under bidder in a Grant Samuel-run auction to buy Huon, Canadian-based global seafood giant Cooke Aquaculture, is understood to have offered $3 per share or $330m by market value.
This column also understands Brookfield was one of the underbidders, rather than TPG Capital as some had earlier suggested.
This indicates it was far outpaced by JBS, which reached an agreement with both Huon and its majority shareholders and founders Peter and Frances Bender, as announced on August 6.
The Benders own 53 per cent of the company.
Larger listed competitor Tassal Group weighed a move early on and offered $2.20 to $2.40 per share, but dropped out once the pricing became more competitive.
However, Tassal is likely to take a second look if another auction takes place.
Turnaround funds were also initially interested but walked away early on once learning industry groups were getting serious.
According to Goldman Sachs analysts, the JBS offer equates to 8.9 times Huon’s forecasted earnings before interest, tax, depreciation and amortisation for the 2022 financial year, while larger rival Tassal is trading on 6.1 times its EBITDA forecast for the 2022 financial year.
Cooke, which has a $2.5bn annual turnover, is advised by Kidder Williams and is believed to be staying close to the action in the event a deal does not proceed with JBS.
Huon shares closed at $3.82 on Friday.
While much focus has been given to the efforts of Andrew Forrest’s private company Tattarang to derail the JBS transaction, the thinking from market experts is that the greatest risk to the sale is opposition from FIRB.
JBS, which is the world’s largest meat packer, has purchased agricultural assets and consumer companies in Australia before, including Paul Lederer‘s Primo Smallgoods business in 2014, outlaying $1.45bn, and Tasmanian abattoirs, assets for which it later received government assistance before they proved to be uncommercially viable and were shut.
But this was before its founders, global chief Wesley Batista and his brother Joesley, were jailed for bribing politicians.
Other factors since raising eyebrows have been investigations into JBS by The Australian Taxation Office, along with its adviser PwC, over tax avoidance and accusations of price fixing in the beef and poultry markets in the United States.
It is worth remembering that FIRB rejected an attempt by Archer Daniels Midland to buy GrainCorp following allegations of price fixing.
Dr Forrest’s family company Tattarang amassed a 7 per cent interest in Huon in June and then increased its stake to 18.5 per cent following the announcement of the JBS transaction.
While the Fortescue Metals founder had enough of an interest to block a scheme of arrangement vote to buy the company, JBS has since launched a takeover bid where shareholders instead sell directly into the offer that has a minimum agreement of 50.1 per cent.
Interestingly, it appears Dr Forrest has been busy on the activist investor front of late, with his Wyloo Metals emerging on Friday as a 5.3 per cent shareholder in Western Areas in a move that may derail a looming cash and scrip buyout deal for the nickel producer by IGO.
With the Benders committed to voting their 53 per cent Huon stake for a JBS deal, Tattarang would not be able to block JBS gaining majority control.
Under takeover law, the Benders can accept a higher offer.
Dr Forrest took out a series of newspaper advertisements on Friday criticising JBS’s animal handling processes, calling on the company to adopt a “no pain no fear” approach to killing animals.
Dr Forrest is using the bid to call on JBS to adopt more humane standards of animal killing globally.
JBS has rejected Dr Forrest’s accusations, saying it already adheres to high standards in its animal handling, rejecting earlier allegations against it made by Dr Forrest.
He said he had bought into Huon to help improve the environmental standards of salmon fishing in Tasmania.
Some still question whether he may have an interest in acquiring the operation, but Tattarang was never a bidder in the auction, according to sources.
The other deal that JBS is trying to get past FIRB is its acquisition of pork producer Riverlea for $175m.
If that transaction is blocked by FIRB, it may mean that it is instead sold to local rival BE Campbell, which was the under bidder in the auction for that business.
Huon was placed on the market through Grant Samuel after coming under pressure from lender Commonwealth Bank, with debts worth about $200m owed to both CBA and Rabobank.
Huon faces major challenges while also suffering from the global pandemic.
Its three-year contract with Coles supermarket is believed to be loss-making and the business needs about $80m of capital spending to address problems such as holes in the nets used for its salmon farming operations in Tasmania.
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