Tassal investors want say on $1.04bn Canadian takeover after board snub

The salmon producer’s shares soar following a $1.04bn takeover bid from its newest shareholder, aquaculture giant Cooke.

Tassal’s salmon pens on the West Coast of Tasmania. Picture: Mathew Farrel

Tassal is under pressure from investors to engage with Canadian aquaculture giant Cooke after the Tasmanian salmon producer said it had rejected a $1.04bn takeover offer from the company.

On Tuesday, Tassal’s board – led by former Incitec Pivot chief executive James Fazzino – also disclosed it has rejected not one but three offers from Cooke, the latest priced at $4.85 a share.

In a statement, directors said Tassal had an “attractive independent future” and “has determined not to engage with Cooke”, believing its offer does not reflect the value of the business.

The bid is a 42.2 per cent premium on Tassal’s closing price from when Cooke started buying shares in the company 10 days ago. It now has a 5.4 per cent holding in the ASX-listed producer.

Tassal’s shares have traded largely sideways in the past two years but investors piled in after Cooke’s bid, sending its stock soaring 16.1 per cent to $4.61.

Hayden Beamish, chief executive of Endeavor Asset Management, bought a holding in Tassal about a month ago and said the offer represented “reasonable value”. “We think it should be presented to shareholders,” Mr Beamish said. “In this market, we’ve had a stock that has gone sideways for a few years and has now received a bid that reflects reasonable value.”

Cooke has indicated that it has Foreign Investment Review Board approval, removing one key hurdle for a potential deal.

“Who knows what will happen in the future,” said Mr Beamish. “Capital markets could dry up. At a minimum, shareholders in the company should have the opportunity to vote on what they think is right for the business.”

But Tassal says it is “experiencing the benefits of scale” after a significant investment in salmon biomass growth. This positions Tassal to take advantage of growing demand for protein with salmon affordable compared with soaring red meat prices. The strong demand has sparked a gold rush in aquaculture given the sector’s efficient food conversion – how much feed is needed to produce a kilogram of meat. Salmon has a ratio of close to 1:1.

Demand is expected to continue to soar after the Tasmanian government said has restricted access to waters, saying there will be no net increase in leased farming areas for at least 12 months – a move that is expected to limit supply from both Tassal and Huon.

Anton Tagliaferro of Investors Mutual – another shareholder – said while the offer was “light” and should be at least $5 or more, the company’s board should engage with Cooke. He drew parallels between Blackstone’s $8.9bn takeover of Crown Resorts, with the US private equity titan increasing its bid after completing due diligence in January.

“It’s a quite a good offer. We’d rather the offer had a five in front of it,” Mr Tagliaferro said.

“The company has been through a major period of investment. It’s just about to start generating a lot of cash from those investments so we think the offer could be improved a bit.

“It’s certainly worth considering in this market. I think it’s always worth engaging – look what happened between Crown and Blackstone and through engagement they were able to extract a better offer.”

Cooke – which has turnover of some $2.7bn and salmon farms in Canada, US, Chile and Scotland – initially expressed interest in Tassal in 2010 and lobbed its first takeover offer in January 2011.

Simon Conn, a senior portfolio manager at Investors Mutual, said it was time for the Cooke to present its best offer for Tassal.

“It’s obviously a business that has chewed up a lot of capital but fundamental things have changed quite a bit over the last 12 months. And I think the offer looks a bit skinny to be honest,” Mr Conn said. “It’s a business that’s going to generate quite a bit more cash than it has in the past and pricing for salmon is trending in the right direction.”

Cooke had also earlier bid for Tassal’s smaller rival Huon.

But it was unsuccessful, with JBS taking over Huon for $425m despite resistance from Fortescue chairman Andrew Forrest, another shareholder.

Tassal’s board said on Tuesday it had rejected two earlier confidential bids from Cooke priced at $4.67 and $4.80 a share respectively, and Cooke’s latest offer still wasn’t high enough.

“The company’s board of directors has evaluated the indicative proposal with the assistance of its financial adviser and has determined that the indicative proposal does not reflect the fundamental value of the business and is not in the best interests of shareholders,” Tassal said.

Cooke is being advised by David Williams, who bought Tassal from receivership in 2003 before floating it on the ASX.