Tassal has today announced a $31.9 million acquisition of the Fortune Group - one of the largest footprint prawn farming bases in Australia.
The completed acquisition includes land, assets and inventory of the Fortune Group’s three prawnfarms located at Yamba, New South Wales; Proserpine, Queensland; and Mission Beach, Queensland.
Tassal Managing Director and CEO, Mark Ryan, said Tassal would invest ~$34 million in a development program across the prawn farms.
"The acquisition of the land, assets and inventory of Fortune Group is strategically compelling to Tassal. It allows us to expand our vertical integration from salmon to include prawns, and unlockfurther synergies in the seafood supply chain through a highly earnings accretive acquisition," Mr. Ryan said.
"We currently process and sell prawns through Tassal’s De Costi Seafoods and we are conscious ofthe fact our customers are demanding more prawns than we can currently supply.
"We estimate for FY19 we will have around 700 tonnes of prawns for sale from the inventoryacquired once fully grown out. Our focus is to grow over 3,000 harvest tonnes per annum in the nextthree to five years."
Tassal has announced an experienced prawn farming leadership team, led by Ben Daley, Head of Supply Chain and comprising an on the ground team of Mark Porter, Head of Aquaculture – Land Based [ex CEO at Petuna Seafoods], David Wood, Senior Manager – Commercial Performance [ex CEO and CFO of Petuna Seafoods], John Maloney, Senior Manager – Prawn Operations [ex Pacific Reef Fisheries], Nick Moore, Technical Specialist [ex Gold Coast Marine Aquaculture] and Courtney Remilton, Prawn & Hatchery Performance Manager [ex Seafarms Group].
"We are confident of our ability to deliver on the potential we see for prawns. The assets we have acquired are substantial and geographically diversified, the industry dynamics are attractive with demand for Tiger Prawns in Australia outstripping supply, and we have a highly experienced team onthe ground," Mr. Ryan said.
A strategically compelling acquisition
- Tassal’s acquisition of De Costi Seafoods enhanced Tassal’s total seafood offer in Australia andsupported further growth in salmon and seafood consumption
- Acquisition of prawn farms provides Tassal with access to a larger addressable market – salmon and prawns comprise 70% of Australian retail seafood sales
- Prawn market size in Australia is circa 60,000 tonnes annually (Australian aquaculture ~10%) –salmon market in Australia is circa 60,000 tonnes annually (Australian aquaculture ~ 90%)
- De Costi Seafood’s distribution capability to all Eastern seaboard seafood markets within 1 day,with market leading seafood value adding capability, and salmon providing the backbone of all seafood offers, puts Tassal in a position to execute a solid prawn sales growth program – adding value for our customers and shareholders
- Prawn farming is land based and provides Tassal with a footprint in high demand aquaculture beyond Tasmania – achieves geographic and species diversification
- Growing / working capital cycle for prawns is 1 year (3 years for salmon)
- Tassal can also apply and transfer technology and science from salmon farming to prawn
farming
- Tassal aims to modernise Australian prawn farming and increase yield and returns
Fortune Group is one of Australia’s largest footprint prawn farming bases
Fortune Group has three prawn farms that are geographically diversified which enhances risk management:
• Proserpine Farm (Queensland) Largest current prawn farm base in Australia, with 192.5 ha of regulated pond capacity on
2,000ha of land
Enhanced processing and hatchery operations to be established, along with enhanced pond infrastructure to optimise existing license
Development spend of circa $24 million planned over 2-3 years Arguably the best farm capacity in Australia for biosecurity
The Proserpine farm site now needs some re-development and modernisation, but the back- bone infrastructure will make this significantly quicker and more economical than a greenfield development
Mission Beach Farm (Queensland) and Yamba Farm (New South Wales) Both have around 40 ha of operating ponds each and provide tiger prawns primarily for major
retailers via De Costi Seafoods Output for FY19 forecast 700tn, but capable of 800-900tn pa A new hatchery and enhanced pond infrastructure to be established to optimise existing license Development spend of circa $10 million planned over 2 years
A value creating EPS accretive acquisition
- Purchase price of $31.9 million – land, assets and inventory – with $1 million deferred to support transition
- Capital investment program of circa $34 million over next 2-3 years
- The acquisition and investment program will be funded by a newly arranged $75 million debt
facility
- 1 year working capital cycle for prawns (3 years for salmon)
- Targeting prawn supply growth from around 700 tonnes to over 3,000 tonnes per annum over the next 3-5 years
- Targeting an EBITDA range of $15 million to $25 million within 5 years (from the three prawn farms), with existing licences
