Project Sea Dragon – when it comes to naming a project, aquaculture company Seafarms Group (ASX: SFG) was on to a real winner. But unfortunately the project has not lived up to its powerful name, leading to a boardroom dispute where paperwork has been lodged by shareholders to remove Chairman and CEO Michael McMahon from his post.
Making the saga most interesting is the 249D paperwork issued to Seafarms is from Avatar Industries which a holding entity controlled by Ian Trahar, a fellow Director on the Board who owns approximately 28% of the Company.
Ironically, it was Trahar that McMahon replaced as Chairman in November 2021 in addition to his role as CEO with the former stepping down to a Non-Executive Director role.
“The changes announced today reflect my confidence in Mick and Ian (Brennan, CFO) to provide the right leadership to take Seafarms and Project Sea Dragon to the next stage. It has been a privilege to be Executive Chairman of Seafarms Group and to see Project Sea Dragon move from an idea to construction, and I remain committed to both the company and the project,” said Trahar at the time.
Golly gosh how things can change in a matter of 6 months!
The promotion of McMahon came just two months after he was appointed CEO in September 2021 which means he could have been appointed, promoted and sacked within the space of 9 months if the 249D resolution passes.
With the filing of the 249D notice to remove McMahon from the Board, Seafarms must call a General Meeting of shareholders within two months to vote on the resolution to remove McMahon.
Despite its cracking name, Project Sea Dragon (PSD) has been a nightmare for Seafarms and shareholders having been touted as what would become the world’s largest prawn farm where development has continually stalled for the past 8 years.
This subsequently prompted a major review led by McMahon and Brennan where recommendations were damning and continuation of the project was not recommended in its current form, incurring a $23.3m write down.
The most critical findings of the PSD review identified that construction of cost effective 10Ha ponds was unproven in Australia and the farm essentially needed to outperform all yield expectations to stand a chance of being profitable.
It’s fair to say Trahar did not take the review’s findings well…
Confident in his view of Seafarms’ prospects, Trahar spoke with his wallet earlier in the month when acquiring $816k worth of SFG shares via on-market buying.
Prior to his arrival at Seafarms, McMahon was CEO and Chairman of Inghams. At present, he takes home an annual salary of $1.25 million to handle the dual-role responsibilities.
For the half year ended 31 December 2021, Seafarms reported a 3% increase in revenue to $15.4 million from its other prawn farms but also reported a $36.8 million net loss which included a $23.3m write down from Project Sea Dragon Pre-Development expenses.