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Australia

Huon Aquaculture (HUO:ASX)

11 Aug 2021
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Huon Aquaculture Group Ltd supplies fish products. The Company offers cutlets, portions, sashimi and sushi, whole salmon, smoked salmon, gravadlax, aswell as provides health and cooking programs.

Current Advice:  Buy at no higher than $3.85 – Risk: Medium

The HUO investment became complicated after only one day of holding, and the calculus has changed in a way that needs to be discussed. We discussed the suspicious buying in the stock as a reason to buy with the view that if Tattarang (the family trust of Andrew Forrest) was the buyer then he may be trying to build a position in advance of a competing bid.

The speculation that Tattarang was indeed the buyer proved correct as a ‘change in substantial holding’ notice was lodged and Tattarang is now the owner of 18.51% of HUO. Tattarang can move to 19.9% without launching a bid itself, and that stake would be a significant blocking stake if it decided to vote against the agreed deal with JBS. As a scheme of arrangements requires 75% of shares supporting a deal, this would leave the deal on a knife’s edge. The Bender family owns 53% and will vote to support the proposal, so 22% of the remaining 27.1% would need to vote in favour of the deal – not ideal but certainly feasible. We saw a blocking stake emerge in Iress’ (IRE) bid for OneVue that ultimately fell short of complicating the deal, although it passed by a tiny margin.

What has since been revealed is that Andrew Forrest is attempting to leverage his stake in exchange for a commitment by JBS to higher farming and environmental standards, both for HUO and its existing operations. JBS is a $22bn Brazilian giant, and while we applaud Twiggy’s use of his considerable wealth to pursue ethically pure goals, it feels a naïve position. JBS has no reason to consider the ultimatum – not only does the Bender family’s support mean blocking the bid is difficult, but HUO is not a big enough investment for JBS to consider such a commitment. The simple fact is that if Twiggy Forrest wants to ensure Huon commits to environmentally sustainable practices, then he will likely have to buy HUO himself. His wealth alone is above that of JBS, and he can certainly afford the rough $400m purchase price (he would only need another $300m or so after buying his existing stake).

So, while the motives behind Tattarang’s purchase have been revealed and aren’t as guaranteed to yield a higher offer, we still feel Tattarang could move to a higher offer if things don’t go the way Twiggy Forrest wants. We will, however, change our risk guidance from low to medium and ask that members are comfortable with their investment size given the increased risk that the deal could be voted down without a new bid emerging.

Minimum Investment Amount and Period

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Contrary to popular belief, Lorem Ipsum is not simply random text. It has roots in a piece of classical Latin literature from 45 BC, making it over 2000 years old. Richard McClintock, a Latin professor at Hampden-Sydney College in Virginia, looked up one of the more obscure Latin words, consectetur, from a Lorem Ipsum passage, and going through the cites of the word in classical literature, discovered the undoubtable source. Lorem Ipsum comes from sections 1.10.32 and 1.10.33 of "de Finibus Bonorum et Malorum" (The Extremes of Good and Evil) by Cicero, written in 45 BC. This book is a treatise on the theory of ethics, very popular during the Renaissance. The first line of Lorem Ipsum, "Lorem ipsum dolor sit amet..", comes from a line in section 1.10.32.

Period

Contrary to popular belief, Lorem Ipsum is not simply random text. It has roots in a piece of classical Latin literature from 45 BC, making it over 2000 years old. Richard McClintock, a Latin professor at Hampden-Sydney College in Virginia, looked up one of the more obscure Latin words, consectetur, from a Lorem Ipsum passage, and going through the cites of the word in classical literature, discovered the undoubtable source. Lorem Ipsum comes from sections 1.10.32 and 1.10.33 of "de Finibus Bonorum et Malorum" (The Extremes of Good and Evil) by Cicero, written in 45 BC. This book is a treatise on the theory of ethics, very popular during the Renaissance. The first line of Lorem Ipsum, "Lorem ipsum dolor sit amet..", comes from a line in section 1.10.32.

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