Could Blackstone go fishing for deals with new $22bn-plus fund?

The Blackstone Group has just raised more than $22 billion from investors for its latest private equity fund. With this mountain of money could the US-based buyout giant look at seafood mergers and acquisitions (M&A)?

Given the increased private equity appetite for seafood M&A, maybe, according to Undercurrent News sources. Blackstone — the world’s largest asset manager with $472bn on its books — completed the first close of its eighth private equity in March, according to Bloomberg News. However, Blackstone has not yet set a limit on the investment pool, which it ultimately expects to eclipse the $24.56bn fund record set by fellow buyout behemoth Apollo Global Management in 2017, which has $249bn under management, reported Bloomberg.

Blackstone has been eyeing deals in the sector before. Back in 2015, Undercurrent revealed Blackstone made a bid for the Peruvian anchovy assets of China Fishery Group, along with industry players Parlevliet & Van der Plas (P&P) and Samherji.

Undercurrent sources feel the likes of Blackstone and Apollo could look to make deals in the seafood sector, given the increased amount of private equity (PE) interest in seafood generally, both upstream and downstream. The latest report from Undercurrent — “Seafood’s Top Dealmakers II: M&A spend closes on $4bn as conglomerates, PEs vie with industry giants” — identified 28 deals from financial players in 2018, up 33% year-on-year from 21 in 2017, having been 20 in 2016 and 2015.

“Blackstone and other PEs should look at wild catch fisheries and aquaculture much more than they have had in the past. These industries are now maturing, are sustainable — at least in the west — and have many companies with strong profitability and growth,” Gorjan Nikolik, an analyst with Dutch lender Rabobank, told Undercurrent.

“The lack of PE activity means this industry is largely unexplored and with many value-creating opportunities. Certainly for the first movers, if they have the knowledge necessary, there will be deals to be made,” Nikolik said.

“Recently private equity funds in the US have been achieving record fundraising amounts which indicate there is still a lot of liquidity in the market. Our firm has seen increased interest in the seafood sector from financial investors as it’s a unique asset class compared to other food and protein industries,” Birgir Brynjolfsson, a partner and founder of Antarctica Advisors, a US-based firm specialized in advising on seafood M&A, told Undercurrent.

“There has been growing interest from financial investors in the seafood sector. Our firm is getting inbound calls every day from funds and family offices that are looking for opportunities in seafood,” said Brynjolfsson.

“The industry dynamics are attractive and seafood, compared to other protein sectors, is a very attractive asset class for both debt and equity investors. The obstacle for investors has been that the seafood industry is complex, fragmented and quite regulated. The investors that have turned out to be most successful have dedicated time and resources to understand the industry and make investments with a clear strategy in mind,” he told Undercurrent.

However, the size of available targets for the likes of Blackstone and Apollo is an issue in seafood. “Large funds need to invest in large deals, and the seafood industry is mostly a ‘middle-market’ sector compared to many other food or protein industries,” said Brynjolfsson.

A deal very much the right size for the likes of Blackstone and Apollo is American Seafoods Group. The valuation of over $1.4 billion current private equity backer Bregal Partners — which has just raised $650m for its second fund — is said to have slapped on the pollock and hake fishing firm will price out most trade players.

“American Seafoods is, in my view, likely to attract strong interest from large institutional investors due to the size of the transaction and the company’s valuable quota ownership,” said Brynjolfsson.

“For a company of this size it cuts both ways, there are not many seafood companies that can handle a transaction of this size, while the deal is large enough to attract interest from institutional investors.  Perhaps the outcome will be a combination of both,” he told Undercurrent.

In a previous interview, Nikolik also said private equity and trade team-ups, like Blackstone did with P&P and Samherji in the aborted China Fishery sale in 2015, could be seen in the American Seafoods process.

More PE deals coming

It’s unlikely to be only American Seafoods that attract private equity interest this year, as can be seen from the flurry of private equity deals in seafood.

There have been more and more upstream deals from large private equity firms of late, such as US-based Platinum Equity’s acquisition of Grupo Iberica de Congelados (Iberconsa) and AMERRA Capital Management/Mubadala Investment Company’s buyout of Nireus Aquaculture and Selonda Aquaculture. Both deals are yet to close.

Amerra has been active in the sector for some time, having bought bass and bream farmer Andromeda Seafood in 2015, which it plans to combine with Nireus and Selonda, creating the world’s largest bass and bream farmer. The US fund also owns Norway-based peptones, proteins and oils producer Biomega Group.

Mubadala, which is the Abu Dhabi sovereign wealth fund and has some $45bn of assets under management, is new to the sector, however. Platinum, which is based in Los Angeles and owns the Detroit Pistons US basketball team, has also not invested in the sector before.

Downstream, US funds Palladium Equity Partners, McCarthy Capital and H.I.G. Capital have also all made investments in companies involved with seafood in the past few months. Palladium snapped up a majority in US distributor Quirch Foods, which is a big player in seafood. McCarthy is going into smoked salmon, having added MacKnight Food Group’s Florida and Nevada operations to Honey Smoked Fish Company, the Colorado-based processor it acquired last year. McCarthy is already in the process of expanding the Honey Smoked plant.

Then, HIG – which was also reportedly involved in the sale process Nireus and Selonda – has acquired Lipari Foods, a food processor and distributor based in the US Midwest which does some seafood.

Other big names, such as KKR & Co., Cinvin, Pamplona Capital Management, CapVest Partners and Stellex Capital, have also been linked to deals.

“There have been few recent examples of new entrants into the industry by financial investors, such as Platinum buying Iberconsa, McCarthy buying into Honey Smoked Fish and subsequently MacKnight, HIG acquiring Lipari, and then Mubadala’s planned investment in Nireus and Selonda,” Brynjolfsson said.

“I hope we will see more large funds follow the footsteps of these funds as the investment community can certainly play an important role in the industry consolidation,” he said.

More money coming

Blackstone is not the only fund raising big money in 2018. Apollo — which raised the $24.56bn record fund in 2017 — is also looking to raise $9bn for various funds.

Apollo, which has just under $250bn in assets under management, plans to launch seven funds in 2019 across a range of strategies, from insurance to real estate to India, according to another Bloomberg report.

Others funds looking to raise money in 2019 are Advent International, which was said to be involved in the Iberconsa process, and Vista Equity Partners, according to PENews. The report does not go into detail on the amount Advent is looking to raise, but said Vista is looking for $16bn for its seventh buyout vehicle.

According to PENews, the efforts of Blackstone, Apollo, Advent, Vista and others could take the total raised past the record level of $566bn for 2017, according to data provider Preqin. Last year, private equity funds raised $426bn, according to the Preqin data.

Then, Bregal — which is selling American Seafoods but building up Blue Harvest Fisheries — announced last week the closure of its second fund, bringing it up to a total of $1.25bn in committed capital under management. The closing of its second fund, Bregal Partners II LP, saw it add $650 million of capital commitments sourced from its current limited partners.

“Our team is proud and appreciative of the support we’ve received from our limited partners,” said Scott Perekslis, co-founder and managing partner with Bregal. “We sincerely value these relationships and the confidence our investors have shown in our team and investment strategy.”

Charles Yoon, managing partner, added the second fund was “off to a great start having already invested in three founder-owned platforms in the consumer, food and retail industries”.

Perekslis and Yoon did not respond to a request for comment from Undercurrent on whether the proceeds of the fund would be used for deals in seafood.

It’s not only PE investors who are set for a busy year in 2019 and beyond, however.

“Our firm is experiencing increased M&A activity in 2019 as the industry continues to consolidate globally,” Brynjolfsson told Undercurrent.

This is causing more cross border and sector deals, as large seafood companies go outside their traditional geographies and species areas.

“I believe we will see more cross-border transactions this year as the trend has been in recent years.  There are large transactions in the pipeline, but we are also experiencing a lot of activity in the middle-market, $25m-100m transactions,” he said.

Then, more big seafood firms with ownership of quotas and also fish farms are looking to buy strong downstream firms, as seen in Japan’s Mitsui & Co. buying into US distributor Mark Foods, a deal Antarctica advised on the buy-side on.

“Large global seafood companies with ownership of resources have come to the realization in recent years that in order to gain market access in the US they have to invest in, or acquire, a well-established distributor in the US as it takes a lifetime to build market share and get closer to the customer, essentially tying together the resource access and the market access,” he said.

However, it’s not all positive news in global seafood M&A. The uncertainty around the trade war between the US and China and also Brexit is stalling some of this cross border deal-making, Brynjolfsson said.

“The recent volatility in capital markets, as well as geopolitical tension reflected in trade-wars and Brexit, has certainly caused some concern in the M&A space, particularly with regards to cross-border transactions. The Young’s [Seafood] sale process is a good example. There you have a very nice company, but investors must be waiting on the sidelines to see what impact the Brexit will have on the UK seafood sector,” he said.