Clean Seas Shareholders Face $0.14 Cash or Risky Yumbah Scrip in $29m Takeover

Background and Transaction Overview

Clean Seas Seafood Limited (ASX: CSS), a South Australian aquaculture company specialising in Yellowtail Kingfish, has agreed to be acquired by Yumbah Aquaculture Ltd through a scheme of arrangement. The transaction, announced in March and formalised in a Scheme Implementation Deed, offers Clean Seas shareholders a choice between a cash exit or an unlisted scrip alternative in Yumbah.

The Default Cash Consideration is set at $0.14 per Clean Seas share, representing a substantial premium of over 50% to the last trading prices prior to the announcement. Eligible shareholders holding at least 3,570 shares may elect to receive one new Yumbah share for every 3.1428 Clean Seas shares held, although this scrip alternative carries higher risk and illiquidity.

Rationale and Recommendations

The Independent Board Committee (IBC) of Clean Seas, comprising independent directors, has unanimously recommended that shareholders vote in favour of the Scheme based on the Default Cash Consideration. This recommendation is supported by an Independent Expert’s Report from BDO Corporate Finance Ltd, which concludes that the Scheme is fair and reasonable and in the best interests of shareholders, absent any superior proposal.

The IBC highlights that the Scheme provides immediate and certain value to shareholders, mitigating Clean Seas’ recent operational challenges, including significant mortalities in the 2024 year class of fish, which have led to downward revisions in sales volume guidance and financial losses. The Scheme also addresses the looming maturity of Clean Seas’ debt facilities in July 2025 and the risk of a dilutive capital raising at a lower share price.

Financial and Operational Context

Clean Seas has faced a challenging operational environment, with a $14 million impairment related to fish mortality and a net loss of over $32 million in the first half of FY25. The Company’s cash position has dwindled to under $1 million, and its debt facilities with the Commonwealth Bank of Australia are due to mature soon, with no certainty of renewal. Without the Scheme, Clean Seas would likely need to raise significant capital under difficult market conditions, potentially diluting existing shareholders.

Yumbah, an unlisted but sizable shellfish aquaculture business with operations across multiple Australian states, plans to fund the cash consideration primarily through a $30 million debt facility from RCPL, an entity controlled by Mr Anthony Hall, who is also Clean Seas’ largest shareholder. Post-transaction, Yumbah intends to maintain Clean Seas’ operations largely as is, leveraging synergies across its diversified aquaculture portfolio.

Shareholder Choices and Risks

Shareholders can either accept the Default Cash Consideration or, if eligible, elect the scrip alternative to retain an indirect interest in the combined entity. However, the scrip alternative is highly speculative: Yumbah shares are unlisted, illiquid, and subject to transfer restrictions. The Independent Expert and IBC have not provided a recommendation on the scrip option due to its risk profile.

Shareholders should carefully consider their personal circumstances, including risk tolerance and tax implications, before making an election. The Scheme Meeting is scheduled for 23 June 2025 in Adelaide, with voting eligibility determined as of 20 June. Court approval is also required for the Scheme to become effective.

Next Steps and Market Implications

Assuming shareholder and Court approval, Clean Seas will be delisted from the ASX and Euronext Growth Oslo, becoming a wholly owned subsidiary of Yumbah. The transaction is expected to provide certainty to Clean Seas shareholders amid operational and financial uncertainties, while expanding Yumbah’s aquaculture footprint beyond shellfish to include Kingfish. Market participants will be watching closely for the Scheme Meeting outcome and any potential competing proposals.