Why the Huon (ASX:HUO) share price is rocketing 40% higher on Monday

It has been a great start to the week for this ASX share…

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The Huon Aquaculture Group Ltd (ASX: HUO) share price is rocketing higher in morning trade.

At the time of writing, the salmon producer's shares are up 40% to $3.92.

Why is the Huon share price rocketing higher?

Investors have been bidding the Huon share price higher today after it announced the receipt of a takeover offer on Friday evening.

According to the release, the company has entered into a scheme implementation deed with JBS Australia that will see the meat and food processing company acquire Huon for $3.85 cash per share.

This represents a 38% premium to the Huon share price of $2.79 at Friday's close.

The company also advised that it intends to declare a fully franked special dividend of up to $0.125 per Huon share prior to implementation of the scheme.

Management notes that this would enable Huon shareholders to realise additional benefits from franking credits of up to $0.05 per Huon share. The scheme consideration would be reduced by the cash amount per share of any such dividend.

Based on the Huon share price on Friday, this represents a 4.5% dividend yield for investors.

Board recommendation

The release explains that Huon's Board considers the scheme to be in the best interest of shareholders and unanimously recommends that they vote in its favour.

This is in the absence of a superior proposal and subject to an independent expert concluding that it is in the best interests of shareholders.

Each Huon director, including Huon's founding and major shareholders, Frances and Peter Bender, intends to vote all the shares held or controlled by them in favour of the scheme. This represents approximately 53% of Huon's issued shares.

Huon's Chairman, Neil Kearney, stated: "Having fully considered a range of alternatives as part of a comprehensive strategic review process, the Board believes this transaction provides Huon shareholders with an opportunity to realise significant value for their shares. The Scheme provides certainty for Huon shareholders and a compelling premium in cash to recent trading prices for Huon shares."

This sentiment was echoed by Huon's Managing Director and Chief Executive Officer, Peter Bender.

He said: "The recommended acquisition of Huon by JBS represents an excellent outcome for our shareholders, partners and staff. This is a testament to the strong position Huon holds in the Australian salmon market. We look forward to seeing the continued growth of the Huon business as part of JBS. We do not anticipate any disruption to business operations."

Huon shareholders will have the opportunity to vote on the scheme at a shareholder meeting. This is currently expected to be held in mid to late October.

The Huon share price is up 44% in 2021.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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