Canadian aquaculture company hooks a slice of Tassie salmon for the right price

Salmon prices in Australia have been soaring.

Canadian aquaculture company Cooke – on the surface – appears to have paid far less for seafood producer Tassal than JBS paid for its smaller rival, Huon, last year.

Cooke’s price of $5.23 per share for Tassal equates to $1.1bn or $1.7bn including its debt.

That was at 10 times its earnings before interest, tax, depreciation and amortisation for the 2022 financial year with its debt included.

Last year, Brazilian meat processing giant JBS bought Huon Aquaculture for $425m.

That deal equated to 11.5 times its EBITDA at the time.

However, both companies have since seen their earnings accelerate substantially in the aftermath of the global pandemic restrictions. So based on forecast earnings, the multiple for the Huon deal would be far lower.

It may also have had to pay more for the company if it were buying in the current environment.

Tassal is a far larger business than Huon and generates $107m of revenue from prawns, which is a higher-margin business than salmon which generated $611m of its overall revenue.

Prawn volumes grew 70 per cent in the 2022 financial year, delivering $26.9m of EBITDA, while salmon sales volumes grew 15 per cent with the price per kilogram up 6 per cent, delivering $147m in EBITDA.

Tassal on Tuesday told the market its EBITDA for the 2022 financial year was $162.64m, up 35.7 per cent from the previous corresponding period.

DataRoom understands that Cooke had been weighing up whether to offer a higher price for Tassal last week or buy the business further down the track.

Some remarked that the $5.23-per-share price Cooke offered was a significant bump from its earlier offers – the last of which, at $4.85 per share, was rejected.

But the deal comes at a time when salmon prices have been soaring in Australia as hospitality venues re-open; and the outlook remains strong with no real competition from offshore salmon farming operators.

To get the deal done, Cooke had to pay up.