Private equity spots snag at Huon Aquaculture, adviser hiredMay 8, 2019
Here’s one car crash the country’s cashed up private equiteers saw coming.
Street Talk understands a handful of the big private equity players, including TPG Capital, spent time running the numbers on listed salmon farmer Huon Aquaculture in recent months, mulling a takeover bid in light of share price weakness.
The investment thesis was that company founders Peter and Frances Bender, who together account for a 66 per cent stake, would be willing to consider a sale at the right price, and the private equiteers could help the company with short-term production challenges and keep their eyes focused on the long-term growth story.
It is understood Huon was aware of the early-stage interest and had adviser Grant Samuel on hand, just in case the situation heated up.
However after a preliminary look – which was said to be something between preparing a financial model to really kicking the tyres hard – the private equity firms walked.
And on Monday, perhaps we found out why.
Huon was out with news that its full-year EBITDA would be $50 million to $55 million, rather than the $64 million to $68 million it had expected only a few months ago.
The company blamed salmon volumes – which were off by about 5 per cent thanks to a jellyfish outbreak late last year and above average sea temperatures through the March quarter.
Huon’s lightly traded shares dropped 4.8 per cent to $4.34 on the news.
The question is whether private equity tries again to build an investment case in light of the downgrade. There are no sloppy seconds in private equity – where one firm is caught looking, its rivals will be quick to follow suit, just in case.
And let’s not forget Pacific Equity Partners has form fishing for salmon – it tried to buy Huon’s listed rival Tassal Group earlier this decade – and bankers reckon it would make sense for a cashed up player to seek to combine the two rivals to create a big business of scale.
A spokesman for Huon said: “The company does not comment on market speculation as a matter of course”.