The investment from Mitsui & Co in Mark Foods shows large, global groups are realizing acquiring or investing in a US distributors is the fastest way to get access to the market, said the advisor to the giant Japanese conglomerate on the deal.
“Global companies are realizing it takes a lifetime to build a market position in the US. The only way to achieve a strong position in the US market is through partnership or an acquisition of a well-established company,” Birgir Brynjolfsson of Antarctica Advisors, who worked as the exclusive advisor to Mitsui on the deal, told Undercurrent News.
Mitsui, which has also has minority stakes in the salmon farming arm of Chile’s Multiexport Foods and Vietnamese shrimp supplier Minh Phu Seafood, already has a US operation involved in the food sector.
However, in order to get deeper access to the US seafood market, the company elected to take a minority position in Mark Foods, known for supplying toothfish to the US market. The deal will be mutually beneficial, said Brynjolfsson, as it also gives Mark Foods access to Mitsui’s raw material.
“The partnership with Mark Foods will give Mitsui strong access to the US market and create new opportunities for Mark Foods by leveraging Mitsui’s resources,” he told Undercurrent.
In a statement, Mitsui said the deal was done with the “aim of creating new value by building on Mark Foods’ excellent customer base” in the US, utilizing Mitsui’s “longstanding US food manufacturing and sales businesses and pursuing synergies with Mitsui’s global affiliate companies which includes farmed shrimp, salmon and tuna production in Latin America and in Asia”.
The deal is a “prime example of the global vertical integration that is happening in the industry, where companies with access to seafood resources are partnering up with companies with access to the market”, Brynjolfsson said.
“Consumers are demanding stable supply and traceability to the source, and the only way to meet that demand is through integration between producers and distributors,” he said.
Earlier in the year, Antarctica advised on deal driven by a similar dynamic, with IMV Holding, a raw material seafood group in which the owners of Argentina’s Newsan are involved, investing in US processor and distributor Stavis Seafoods.
On Monday, Aqua Star, a Red Chamber Group-owned US importer, announced an investment in an Indian shrimp processor, Sagar Grandhi Exports, a deal also driven by the need for linking the market and supply.
“The global marketplace wishes to work as closely with primary producers as possible and this partnership allows us to accelerate that process in North America particularly, as well as other parts of the world,” said Dirk Leuenberger, Aqua Star CEO.
“We believe that the consolidation and integration trend will continue. Our view is that 2018 will be a very active year for M&A [mergers and acquisitions] in the seafood industry for several reasons. Up until now, transactions have been driven by fragmentation and lack of succession planning at the ownership level,” he said.
“Now, on top of those fundamental reasons, we are seeing more and more business owners wanting to transact because of lower tax rates in the US. That, coupled with low interest rates, abundant capital from financial investors, signals another strong year for M&A in the seafood industry,” Brynjolfsson said.
During a conference on M&A during the Boston seafood show, Ignacio Kleiman, the managing partner of Antarctica, also mentioned the tax reforms.
As part of the tax reforms, there were reductions to inheritance taxes and fears that these could be temporary creates a “window of opportunity” for family owned seafood firms looking to sell, Kleiman said.
Jason Brantley, a Seattle, Washington-based senior vice president at Bank of America Merrill Lynch, said a discontent on valuations means deals that are being talked about are not closing, however.
“I’ve had variations of the same conversation probably ten times in the last two days,” he said on March 12, during the M&A panel. “‘I’m not hearing a lot. Are you hearing a lot?’ People feel like they must be missing something because they’re not hearing a lot. I’m sort of relieved because I’m not hearing a lot either.”
He also referenced the tax cuts, stating the reform and other macroeconomic factors could push interest rates.
“While money is cheap, the expectation is that it’s going to get a little more expensive and we think that in the near term 2018/19, that could drive additional M&A activity because people are going to want to take advantage because they see rates moving up,” he said.
Tom Seaman | Undercurrentnews.com