The Tassal Group Limited (ASX: TGR) share price is surging ahead as it got bitten by the merger and acquisition (M&A) bug.
Shares in the salmon farmer jumped 4.4% to $3.53 when the S&P/ASX 200 Index (Index:^AXJO) inched up 0.2% at the time of writing.
The Tassal share price is even outperforming the Insurance Australia Group Ltd (ASX: IAG) share price as it gained 4.3% after announcing a board shake up.
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M&A fever sends Tassal share price jumping
Investors are getting excited about the Tassal share price after its rival received a takeover offer. The Huon Aquaculture Group Ltd (ASX: HUO) share price surged close to 40% when it revealed South American food giant JDS was offering $3.85 a share for the Huon.
Huon's board of directors are urging shareholders to accept the deal as the offer is a 38% premium to its Friday closing price.
The offer is priced at around eight times Huon's FY20 earnings before interest, tax, depreciation and amortisation. That looks to be a generous multiple given Huon's track record.
How much could the Tassal share price be worth to an acquirer?
In this market, just about everything is a takeover target. Some high-profile examples include the Afterpay Ltd (ASX: APT) share price, Australian Pharmaceutical Industries Ltd (ASX: API) share price and Galaxy Resources Limited (ASX: GXY) share price.
Little wonder that investors believe Tassal too could make an appetising target. This is particularly so given that the Tassal share price is barely at breakeven over the past year when the ASX 200 has surged 26%.
If the same multiples were applied to the Tassal share price, a bidder could be willing to cough up around $4.30 a share for Tassal – or roughly 20% more than the current share price.
That's all hypothetical of course, but we can't let the truth stand in the way of an exciting story!
Smelling fishy
With such a buzz around the sector, investors have forgotten (or chosen to ignore) the controversies surrounding salmon farming in Tasmania.
Environmentalists have warned that large scale farms run by Tassal and Huon are polluting the bay. Mass fish death has captured headlines and pitted scientists against the salmon farmers and state government.
The next big catch
But JDS doesn't seem concerned about this and said that if it gets all the necessary approvals, the transaction could be completed by year end.
JDS will be paying around $500 million (including debt) for Huon. One billionaire that could be happy is Andrew Twiggy Forrest. He recently paid $20 million for a 7.5% stake in Huon, reported the ABC.
It's a big question mark if Tassal will get baited by a large suitor. But one thing is for sure, Huon won't be the last ASX share to get an offer.
