In an announcement on Thursday, Tassal Group (ASX:TGR) confirmed market speculation of an acquisition deal with De Costi Seafoods. The report said that although the acquisition had not yet been formally finalised or completed, it had made significant and key advancements in the talks. Potential acquisition talks have been underway for months but were held back because Tassal hadn’t offered “an acceptable level yet”, according to De Costi director George Costi.
Tassal confirmed several key points in the announcement on Thursday. The due diligence process on the deal has been completed. The board members of Tassal have approved the acquisition to proceed to formal documentation on the basis of certain terms. Part of the non-binding terms include the complete acquisition of De Costi Seafoods through a share purchase, free from all debt and other encumbrances. The deal will not include the assets in the Sydney Fish Markets or the two retail assets at Bondi and Chatswood, NSW. The purchase value has been pegged at five times the maintainable earnings before interest, tax, depreciation and amortisation (EBITDA), which will be paid up front in cash at the completion of the deal. There will also be a 3 years earn out component payable in new Tassal shares.
Both the cash payments and the earn out payments will be earnings accretive for shareholders. George Costi will remain in charge of operations at De Costi Seafoods for a minimum of 3 years after the completion of the acquisition. The report said the acquisition completion was expected to occur some time in July of 2015. It also said the cash payment would be funded through debt rather than any capital raising. Shares of TGR are up 7.5c, or 2.29 per cent, at $3.36 per share around 2:16pm on Thursday. TGR has fallen 15.28 per cent in the last 12 months and 14.19 per cent so far this year.
Author: Simon Herrmann
Jun 04, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.