Ann: Tassal 1H22 results presentation, page-17

According to the Grant Thornton valuation commissioned by Huon to justify the JBS acquisition price, there was a 40% premium provided to Huon for having a higher concentration in share ownership. Essentially, the Bender family owned I think >50% of Huon and were able to push through a sale price. The other argument is that Huon had a pure salmon play (no De Costi or prawns), and it was in terrible strife so if one could turn it around and generate normal profits it may seem cheap?

I don't buy that personally though. First, lots of M&A happens with minority shareholding companies.. so why a 40% premium for the Benders who clearly they would want kicked out of the business anyway? Secondly, prawns are a higher ROIC growth machine and surely that should lead to a price premium not a discount. Third, the turnaround required for Huon is reversing a series of bad decisions which takes time and is costly - if you normalise the acquisition price on pre-Covid EBITDA or look at it on a per tonne of production it still remained 40% discounted.

Tassal's share price feels like it's in a weird position where it had 13% shorts who got out with no losses despite their investment thesis being proven incorrect; where consensus has been so high that they smash it out of the ball park and the share price barely moves; and where it continues to trade at a "1 std dev discount" according to Citi or ~20% according to Goldman Sachs. The market is valuing Tassal's as a cheap company for a range of factors. To be honest I thought the closing of the gap of cash flow to EBITDA would be the driver in re-rating, but perhaps it will only be re-rated if it can demonstrate increasing returns on capital of prawns vs salmon.