Clean Seas Seafood updates shareholders on a revised equity conversion ratio for the Yumbah scrip alternative following significant impairment charges by Yumbah Aquaculture. The scheme meeting is now set for 8 July 2025.
- Yumbah plans $23M-$28M impairment on abalone assets
- Revised scrip alternative ratio – 1 Yumbah share per 2.8571 Clean Seas shares
- Default cash consideration remains $0.14 per Clean Seas share
- Scheme meeting rescheduled to 8 July 2025
- Independent Board Committee unanimously recommends voting in favor
Background to the Scheme
Clean Seas Seafood Limited (ASX – CSS) is progressing with a proposed acquisition by Yumbah Aquaculture Ltd, a major player in Australian shellfish farming. The transaction, structured as a scheme of arrangement, aims to transfer 100% ownership of Clean Seas to Yumbah. This follows announcements earlier in 2025 and is subject to shareholder approval and court sanction.
Key Update – Revised Yumbah Scrip Alternative Ratio
In a significant update, Clean Seas has issued a supplementary scheme booklet revealing that Yumbah will record impairment charges estimated between $23 million and $28 million on its abalone assets. These non-cash impairments reflect operational challenges including higher mortality rates due to unusually warm summer waters and harmful algal blooms, as well as strategic decisions to cease production at two farms.
Consequently, Yumbah has adjusted its internal valuation of its shares downward to $0.40 from a prior $0.44. This valuation adjustment has led to a revised equity conversion ratio for Clean Seas shareholders opting for the scrip alternative – one new Yumbah share for every 2.8571 Clean Seas shares, compared to the original ratio of one for every 3.1428 shares.
Implications for Shareholders
Shareholders who do not elect the scrip alternative will receive the default cash consideration of $0.14 per Clean Seas share, unchanged from prior announcements. The Independent Board Committee continues to unanimously recommend voting in favor of the scheme based on this cash consideration, citing the opinion of the Independent Expert that the cash offer is within a fair valuation range.
However, the committee refrains from recommending the scrip alternative due to its speculative nature and the individual risk profiles of shareholders. The scrip option exposes shareholders to the operational and market risks facing Yumbah, particularly given the recent impairments and restructuring.
Rescheduled Scheme Meeting and Next Steps
The scheme meeting has been rescheduled to 12 – 00pm Adelaide time on 8 July 2025, providing shareholders additional time to consider the supplementary information. Proxy voting deadlines and election deadlines for the scrip alternative have been extended accordingly.
Following shareholder approval, the scheme requires final court approval, with a second court hearing scheduled for 15 July 2025. If all approvals are obtained, the scheme implementation and consideration distribution are expected by late July.
Yumbah’s Operational Context
Yumbah is a vertically integrated shellfish business with operations spanning abalone, mussels, and oysters across multiple Australian states. The impairments stem from a combination of environmental stressors and strategic shifts, including ceasing abalone production at the Port Lincoln South and Bicheno farms to focus on higher-value endemic Greenlip abalone.
Despite these challenges, Yumbah remains well positioned in oyster markets and is expanding its mussel operations, aiming to balance production and improve cash flow. The impairment charges, while significant, are non-cash and reflect a prudent accounting response to current market and operational realities.
Bottom Line?
With the scheme meeting deferred and the scrip alternative ratio adjusted, shareholders face a critical decision balancing immediate cash certainty against speculative equity exposure in a reshaped Yumbah.
Questions in the middle?
- How will Yumbah’s impairment charges impact its long-term operational performance?
- What proportion of Clean Seas shareholders will opt for the scrip alternative given the revised ratio?
- Could further environmental or market challenges prompt additional adjustments before scheme implementation?