The deal has gone down – Tassal Group Ltd., the Atlantic salmon farming giant, has agreed to buy Australia’s De Costi Seafoods Business in a two phase, cash and share agreement.
Tassal plans to kick off the transaction with an upfront AUD 50 million (USD 38.3 million; EUR 34.5 million) payment to De Costi, and then, over the course of three years, shell out an additional “growth-based earn-out component” via the issuance of new shares; Tassal will cap the earn-out component at 10 million new shares. All payments are based on a multiple of approximately five times the maintainable EBITDA of De Costi, Tassal said.
With the acquisition, Tassal will be one step closer to snatching up a considerable cut of Australia’s AUD 4.3 billion seafood market, as well as broadening its domestic salmon capabilities, according to Mark Ryan, Tassal’s managing director and CEO.
"The proposed acquisition of De Costi Seafoods will further build on our domestic salmon capabilities, increase Tassal's vertical integration in salmon, drive increased scale and provide Tassal with access to the broader seafood market," Ryan said.
"This increased scale will drive further efficiencies and benefits to both Tassal's salmon offering as well as seafood, and uniquely position Tassal for its next phase of growth," he added.
The success of the deal has some conditions, mainly that "no material adverse change" will befall De Costi’s business; that De Costi will partake in a Tassall restructure; and that George Costi, the De Costi managing director, will be able to keep his place in the company for at least three years.
De Costi Seafoods stands to complement Tassal well, as both companies have similar salmon and seafood strategies, said Allan McCallum, Tassal’s chariman.
“The De Costi Seafoods Business is one of the largest in Australia’s seafood industry. It has access to the best seafood range, a strong capability to process a wide variety of seafood, market leading seafood expertise, and a central location that enables it to service retailers down the East Coast of Australia and South Australia,” McCallum noted.
What remains paramount about the deal is what it stands to offer the consumer, said CEO Ryan.
“Most importantly, the combination of Tassal with De Costi Seafoods will provide significant customer and consumer benefits. Tassal will be able to enhance De Costi Seafoods’ focus on seafood category management, ranging and innovation. These are all areas that Tassal has led, and continues to lead the market with respect to salmon, and will now be able to expand across into the seafood category,” Ryan concluded.
Although the deal has yet to be officially finalized, it has been structured in such a fashion as to allow Tassal to acquire De Costi Seafoods and the benefit of its earnings as of 1 July; similarly, George Costi will obtain the benefits of the earn-out component from 1 July once/if the agreement gets the appropriate sign off.
De Costi’s annual earnings before the acquisition were marked at approximately AUD 10 million (USD 7.6 million; EUR 6.9 million). What’s more, the company posted a AUD 2.8 million (USD 2.1 million; EUR 1.9 million) profit in 2014. De Costi was founded in 1981 at the Sydney Fish Market in Pyrmont.
As of 1 July, Tassal's shares have jumped 8.1 percent to AUD 3.60 (USD 2.7 ; EUR 2.4).
