Tassal Group Limited to acquire De Costi Seafoods: What you need to know

Salmon business Tassal Group Limited (ASX:TGR) will acquire seafood procurement and sales business, De Costi Seafoods.

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Shares of leading Australian salmon producer, Tassal Group Limited (ASX: TGR), jumped 1.8% higher this morning following an announcement that it would acquire seafood procurement, processing and marketing business, De Costi Seafoods.

Although the acquisition is yet to be formally completed, Tassal says it has entered into a non-binding term sheet to acquire the business by an upfront cash component equivalent to 5x maintainable EBITDA (earnings before interest, taxes, depreciation and amortisation), and an earn-out component over three years payable in Tassal shares.

The deal will not include De Costi's Sydney Fish Markets business, or two retail outlets owned by George Costi at Bondi or Chatswood, New South Sales. The deal also requires George Costi to remain in charge of De Costi Seafoods for three years, reporting to current Tassal Group CEO, Mark Ryan.

"De Costi Seafoods provides Tassal with an attractive vehicle to deliver the Company's salmon and seafood growth strategy, which is about maximising domestic per capita consumption of seafood," Mr Ryan said. "Given the structure of the transaction, Tassal will not need to raise any equity capital for the upfront consideration, and the acquisition will be immediately EPS accretive pre-synergies."

Over the past five years, shares of Tassal have easily outperformed the S&P/ASX 200 (Index: AXJO) (ASX: XJO) and those of ASX-listed peers, Huon Aquaculture Group Ltd (ASX: HUO) and Clean Seas Tuna Limited (ASX: CSS), following a decision to focus solely on the domestic seafood market.

Motley Fool contributor Owen Raskiewicz has no position in any stocks mentioned. Owen welcomes your feedback on Google plus (see below), LinkedIn or you can follow him on Twitter @ASXinvest. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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