JBS buyout of Huon under threat as market looks to Andrew Forrest for next move

Tasmanian salmon producer Huon had agreed a deal with JBS.

Andrew Forrest’s Tattarang is being tipped as likely to emerge as the holder of a stake of up to 19.9 per cent in the Tasmanian salmon producer Huon in the coming days, in a move that could derail an agreed deal by JBS to buy the business for $425 million, excluding debt.

It is understood that a buyer was in the market on Monday night to acquire around 10 per cent of the stock, with sources suggesting that Mr Forrest’s private investment group Tattarang was the acquirer.

Tattarang recently purchased a stake of about 7 per cent.

Interestingly, sources say the buyer of the 10 per cent stake this week was amassing shares at a price of up to $3.92, which suggests that it is unlikely to support the $3.85 per share offer agreed upon with the company late last week by JBS.

Andrew Forrest. Picture: Colin Murty

Shares on Friday had closed at $2.70 before Huon’s agreed deal with JBS had been announced.

Founders Peter and Frances Bender own 53 per cent and have committed to voting in favour of the transaction.

But an interest of 19.9 per cent held by Tattarang would be enough to block the JBS scheme of arrangement in a shareholder vote.

The JBS offer equates to 8.9 times Huon’s forecasted earnings before interest, tax, depreciation and amortisation for the 2022 financial year, according to Goldman Sachs analysts, while larger rival Tassal is trading on 6.1 times its EBITDA forecast for the 2022 financial year.

Some observers consider it a curious move by Tattarang, given that it did not participate in the Grant Samuel-run sale process for Huon.

They are now questioning whether it instead has a recapitalisation plan on the agenda for the company to secure a greater hold on the business.

It is no secret that 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.

Compounding matters is that Huon is said to face pressure from its lender Commonwealth Bank, with debts worth about $200m owed to both CBA and Rabobank.

Sources say that the company’s strategic review and sales process launched at the start of this year followed pressure from its lenders.

As an aside, it was interesting to note that well known adviser in the agriculture and consumer space, David Williams of Kidder Williams, was spotted in Hobart last week in talks with seafood experts from the Commonwealth Scientific and Industrial Research Organisation.

It is worth remembering that Mr Williams was the banker who bought Tassal out of receivership more than a decade ago before buying the salmon business from Webster’s.

It is not clear whether Mr Forrest is being advised by Mr Williams, although JBS tapped Rothschild to buy the business.

One of the under bidders for the Huon auction was global seafood giant Cooke Aquaculture, based in Canada, which has a $2.5bn annual turnover.