The $500m takeover bid of Tasmanian salmon farmer Huon by Brazilian meat processing giant JBS is a “certainty’” with a key shareholder vote on Friday expected to approve the deal.
Sam Baker, private wealth adviser from Shadforth Financial Group, said FIRB approval on Monday removed any question about the deal, leaving shareholders to decide just how much will be sold off.
“It is a certainty that JBS will receive the majority of the shares and therefore control of Huon will move across,” Baker said.
Baker said the vote, which will take place on Friday, will probably have two results: either JBS takes full control of Huon and compulsorily acquires shares held by minor shareholders, or it will be forced to accept a smaller majority position.
The deal has been organised by a Scheme of Arrangement – a friendly takeover where the board of the company losing control supports the transfer and minority shareholders are bought out by the incoming owners.
Huon’s owners, Peter and Frances Bender – who own 52% of Huon – initiated the sale of the company in February this year after losses they attributed to the pandemic. In August the company announced a $128m loss despite a 39% increase in production.
Once the agreement was approved by the board, JBS needed 75% of shareholders to vote in favour of the transfer in order to take full control of the company.
While JBS fought off a competing bid by Canadian aquaculture firm Cooke, a twist came when mining billionaire Andrew Forrest increased his share in the company to 18.5% and began floating the possibility of his own takeover bid.
This forced JBS to make a second “off market” offer where it would take a smaller controlling interest in Huon should it receive just 50.1% of support from shareholders.
Baker said he expected Australian Super to vote in favour of selling to JBS on Friday alongside other institutional investors, giving the Brazilian multinational the minimum 75% support it needed to take full control.
At $3.85 a share this compulsory acquisition would net the Benders $220m, while Forrest could pocket roughly $12m if he decides to sell his, accounting for the money spent to acquire different amounts of shares at prices between $2.40 and $3.85 each.
Even if Australian Super voted with Forrest to reject the takeover by refusing to sell their shares, Huon would still be absorbed into the multinational entity leaving Forrest with little influence over the company’s operation.
“If you think about it, it’s a $530m acquisition in what is more than a $20b sized company,” Baker said. “Huon will only make up about 2.5% of JBS’ global operation. And Andrew Forrest will only own 18% – if he decides to hold on to his shares.
“That’s 0.05% of the total [JBS] operation. It’s not even a rounding error, really.”
The Guardian contacted Forrest’s investment firm, Tattarang, which is handling the bid but did not receive a response by publication.
Once the result of the vote is known, final approval will be given by a court next Wednesday but unless an unforeseen irregularity is detected, this step is considered a formality.
Federal Greens senator Peter Whish-Wilson said whatever the outcome, the development was “disappointing”.
“I can’t see JBS being a driver of reform to the industry,” Whish-Wilson said. “They play to win. I don’t think they’re going to care about a social licence. It isn’t in their corporate DNA.”
Whish-Wilson said that as JBS has access to more investment capital, he anticipates the company will ramp up its operations at a time when Huon will be subject to fewer reporting requirements
As JBS assumes total control of the company, Huon will become a private entity and will no longer be required to report to the Australian Stock Exchange, leaving Tassal as the last publicly-listed Australian salmon farmer.
“For anyone who wants to look at it forensically, it will be very difficult,” Whish-Wilson said. “The industry is going to be less transparent because there’s only one company to focus on.”