The Tassal Group Limited (ASX: TGR) share price is in the green after the company entered a takeover agreement and released its financial year 2022 results.
The salmon farming stock is surging 5.21% to trade at $5.145 on this eventful morning.
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Tassal share price soars on takeover agreement
Salmon farmer Tassal – worth $1 billion as of Monday's close – has entered a takeover agreement wherein investors will receive $5.23 per share held in the ASX-listed company, assuming no final dividend is paid.
It's set to be snapped up by Canadian seafood company Cooke Inc via a scheme of arrangement.
Cooke has previously put forward three unsuccessful bids for the company. The third – worth $4.85 per share – was rejected by Tassal's board in June.
The latest offer implies an equity value of approximately $1.1 billion and an enterprise value of $1.7 billion.
It also represents a 49% premium to the Tassal share price as of 22 June, being the last trading day prior to reports an entity affiliated with Cooke had acquired a stake in Tassal.
Shareholders are expected to vote on the takeover in November.
Cooke already owns a 10.5% stake in Tassal. However, it won't be allowed to vote at the scheme meeting.
The takeover is also subject to regulatory and court approvals, as well as an independent expert finding it's in the best interests of shareholders.
The company predicts it will be implemented before the end of 2022.
Tassal reports 60% lift in after-tax profits
The Tassal share price is likely also being boosted by the company's financial year 2022 earnings, released this morning. Here are the highlights:
- $788.7 million of revenue – a 32.8% increase on that of the prior corresponding period (pcp)
- Net profit after tax (NPAT) came to $55.3 million – a 59.9% improvement
- Earnings before interest, tax, depreciation, and amortisation (EBTIDA) reached $162.6 million – a 35.7% lift
- Operating cash flow lifted 127.8% to $139 million
- Free cash flow increased 223.6% to $95.4 million
The company is now producing around 40,000 tonnes of salmon each year while its investment in prawns is delivering strong results. It delivered around 5,700 tonnes of prawns over the period.
Salmon prices also experienced a strong re-rating last financial year, with prices ending the year at around $23 per kilogram, having started at approximately $12 a kilogram.
What else happened in FY22?
Last financial year 2022 was a good one for the Tassal share price. It gained around 36% over the 12 months ended 30 June, mostly on the back of Cooke's third unsuccessful bid.
The company's short position also dropped notably over the period. After starting the financial year with 7.75% of its shares in the hand of short sellers, it ended it with a short position of just 1.55%.
What did management say?
Tassal managing director and CEO Mark Ryan commented on the company's results, saying:
It is pleasing to see our strategy translate into strong growth for our people, customers, and shareholders, with the business now generating strong cashflow growth.
On the back of the investment made, Tassal delivered a step change in cash generation in FY22, with attractive domestic industry dynamics and strong global supply-demand fundamentals underpinning strong pricing outcomes in the salmon and prawn markets.
What's next?
The company didn't provide any earnings guidance in today's release.
However, it did note its salmon production is now at scale, but it can expand its prawn production to drive medium to long-term growth.
Tassal share price snapshot
It's been a good year so far for the Tassal share price.
It's gained 48% since the start of 2022 and 47% since this time last year.
Meanwhile, the All Ordinaries Index (ASX: XAO) has slumped 7% year to date and 6% over the last 12 months.
