JBS takeover of Huon: “Ultimately a political decision”

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For Australia’s Foreign Investment Review Board to reject  the JBS bid for Huon would require a change of position from the Australian Government.

On 29th of October, Huon shareholders will meet to decide on the outcome of the takeover bid by Brazilian meat giant JBS.

One of the complications to the rollercoaster takeover of the Tasmanian salmon producer is that JBS has been plagued by controversy in recent years, with its founders and controlling shareholders jailed for bribing more than 1,800 Brazilian politicians and the company fined billions of dollars in a major corruption scandal. It has also faced two separate price-fixing cases in the US.

There has been ongoing speculation that JBS’ bid for Huon could be rejected by the Australian Foreign Investment Review Board (FIRB).

Read more: FIRB to decide on JBS bid for Huon as Tattarang waits in the wings

But according to Tasmania-based financial analyst Sam Baker, any decision by FIRB will not be made until after Huon shareholders have voted on the takeover bid at the end of the month.

Financial analyst, Sam Baker

Baker told SalmonBusiness, “As far as the Foreign Investment Review Board is concerned, there won’t be an announcement on that until the scheme meeting occurs. And because it may be that if the shareholders don’t approve the transaction, there’s no need for the Foreign Investment Review Board to make a decision on the takeover.”

Track record
The investment review panel considers the ‘character of the investor’ when assessing whether to green light a foreign investment, specifically looking at a company’s corporate governance practices.

Baker continued, “JBS has made several acquisitions in Australia, in the food space. In the last five to seven years. The biggest one  (larger than the Huon deal) was a promo smallgoods acquisition at AU$1.5 billion. That was approved.”

“However, I suppose there has been a bit of local focus on JBS as a corporate citizen and then there might be some pressure being applied to the Foreign Investment Review Board because it is ultimately a political decision.”

Baker continued, “The Treasurer of Australia, Josh Frydenberg, has to give final approval to any recommendation that the Foreign Investment Review review makes and it could be that they approve it, but he could basically knock it over. But, that doesn’t happen very often.

Known commodity
“It’s a fairly broad decision. It’s basically to ensure that it is within the national interest for the foreign capital to be a custodian of the asset. JBS are a known commodity. They’ve been through probity, as I mentioned with other acquisitions, in the past, other food acquisitions.

“So it would probably require a change of position from the Australian Government towards this company.”

“What I would say also, is that there is another layer of complexity that aquaculture lease for salmon are granted by the state government. Largely. The state government haven’t made too many noises against his acquisition. So I wouldn’t say the issue is there. But that is another another area of complexity that needs to be ticked off,” Baker concluded.