Port Lincoln-based shellfish producer Yumbah Aquaculture is ramping up its growth plans by pursuing a merger with sustainable aquaculture company Clean Seas Seafood (ASX: CSS) in a deal that values the target at $28.1 million.

The offer price by Yumbah, which holds an investment-grade shellfish aquaculture portfolio with operations in South Australia, Victoria, Tasmania and NSW, is at a 52 per cent premium to the 9.2c closing price of Clean Seas shares yesterday.

Investors sent shares in the company to a high of 13.5c today, showing confidence that a merger will proceed.

Anthony Hall, director and the largest shareholder of Yumbah with a 53.6 per cent interest, is Clean Seas’ largest shareholder and currently controls about 22.6 per cent of the target’s issued capital. Clean Seas director Gary Higgins is also a director and chairman of Yumbah.

The merger proposal follows Yumbah securing a buyout of former ASX-listed Sydney rock oyster producer East 33 in November last year, marking another major expansion of the company’s “blue water economy” assets.

The merger proposal comes at a challenging time for Clean Seas which revealed in December that  it was experiencing higher-than-expected mortalities within the Year Class 2024 cohort of its fish stock.

Clean Seas is described as a global leader in full-cycle breeding, farming, processing and marketing of its Yellowtail Kingfish which is renowned by leading chefs and restaurants for its exceptional quality. The company is the largest producer of aquaculture Yellowtail Kingfish outside of Japan.

Under the proposed merger, Yumbah is making a cash offer of 14c per share cash to acquire all of Clean Seas' stock. However, an alternative scrip offer is also on the table for Clean Seas shareholders although the ratio of Yumbah shares to be offered has yet to be determined.

The offer is conditional on “mutual satisfactory due diligence”, the proposal being independently assessed as being in the best interests of shareholders and the absence of a superior offer.

Should a merger proceed, Clean Seas will join Yumbah’s existing portfolio of businesses that include Victorian mussel producer Yumbah Sea Farms, oyster producer Cameron of Tasmania, Eyre Peninsula Seafoods which owns premium mussel brands Kinkawooka Shellfish and Boston Bay Mussels, and East 33.

Each of these businesses have been acquired by Yumbah over the past four years, with the Eyre Peninsula Seafoods buyout in 2023 making Yumbah Australia’s largest producer of mussels and abalone.

Yumbah’s origins stem back as far as 1988 when a group of South Australian entrepreneurs successfully spawned and grew abalone at West Beach and Port Lincoln. The industry was born in 1993 with the establishment of the country’s first commercial abalone farm at Port Lincoln’s Point Boston.

But it was the merger of Narrawong abalone farm with Southseas Abalone in 2005 that laid the foundation for Yumbah Aquaculture which was the result of Southseas being rebranded in 2016.

Clean Seas Seafood today has moved to progress the buyout proposal from Yumbah Aquaculture which has been recommended by the board.

“Following careful consideration, the IBC (independent committee of directors) has determined that it is in the best interests of CSS shareholders to progress the proposal and allow Yumbah to undertake further due diligence,” says the company.

“Subject to Clean Seas and Yumbah agreeing to a SID (scheme implementation deed) on terms acceptable to Clean Seas, the IBC unanimously intends to recommend that CSS shareholders vote in favour of the proposed scheme (at the current offer price of 14c per share) and each director intends to vote any CSS shares they control in favour of the scheme.”

Clean Seas slumped to a bottom-line loss of $33.45 million in FY24, down from a $5.99 million profit a year earlier.

While revenue was steady at $68.8 million, the result was hit by higher costs and a $12.17 million impairment.

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