Mitsubishi, Legend rule out Clearwater bids with Antarctica brought in to drum up global interest

Antarctica Advisors, one of the most prolific seafood corporate finance advisory firms, has been brought in to work with RBC Capital Markets on adding more international players to the sale process for Clearwater Seafoods, sources told Undercurrent News.

RBC is leading the Clearwater sale, which was announced on March 5, with Antarctica acting as co-advisor, Clearwater’s Christine Penney confirmed to Undercurrent. The revelation Florida, US-based Antarctica will also work on the sale of Clearwater — being valued by analysts at between CAD 880 million to CAD 1.2 billion ($641m to $847m) — comes as two big Asian players, Legend Holdings of China and Mitsibushi Corp. of Japan, ruled out bids to Undercurrent.

Lenovo PC maker Legend, via its subsidiary Joyvio Agriculture Development, snapped up Chilean salmon farmer Australis Seafoods last year for some $922m and acquired a majority stake in Australia’s Kailis Bros in 2016. Joyvio, however, will not make a play for Clearwater. Both Legend and Mitsubishi had been seen by some Undercurrent sources as foreign players with the deep pockets and rationale to be interested in Clearwater.

“We just concluded the Chilean salmon deal last year, this year we will keep our eyes fully on after-acquisition integration, no plan to do a new deal. It’s a pity for us to miss this opportunity to buy such a great company [Clearwater],” Shaopeng Chen Joyvio’s CEO, told Undercurrent.

Mitsubishi — which bought salmon farmer Cermaq Group in 2014 and is the long-term owner of Princes in the UK — does not have the product crossover with Clearwater to bid, the company’s Yasumasa Kashiwagi, chief operating officer of its fresh foods division, told Undercurrent.

Analysts and Undercurrent sources have tipped Canadian firms Cooke and Premium Brands Holdings, as well as large pension funds, as possible interested parties from Canada. Cooke declined to comment on any possible interest, with Premium Brands not responding.

Ownership limits, high price tag

An issue for overseas buyers will be Canada’s rule on 51% of fishing vessels and quotas being owned by a citizen of the country.

Then, there is the high valuation a company like Clearwater will command, which will limit the field of Canadian and international bidders. Clearwater could command an enterprise value (EV) of as much CAD 1.2bn, roughly a 12x multiple of earnings before interest, taxes, depreciation and amortization (EBITDA), Doug Cooper, an analyst with Beacon Securities, told Undercurrent.

Derek Lessard, an analyst with Montreal, Canada-based brokerage TD Securities, gave an EV of CAD 880m-CAD 940m, based on an 8-8.5x multiple of the consensus on Clearwater’s 2020 earnings forecast.

Despite the high value of Clearwater and the ownership limitation, there is expected to be international interest from big players, with the likes of Royal Greenland and Japan’s Maruha Nichiro, Mitsui & Co., Nippon Suisan Kaisha (Nissui) named by sources as possible bidders. Royal Greenland declined to comment, with Maruha Nichiro, Mitsui and Nissui all not responding.

Antarctica has worked on similar, smaller deals in the US, where global companies have got around the even stricter 25% limit on foreign ownership of fishing vessels and quotas. Last year, Antarctica advised Seafreeze on the sale to a group backed by Spain’s Grupo Profand. The Spanish company partnered with Michael Tourkistas, a seafood sector veteran and the founder of East Coast Seafood Group, on the vessel side of the deal, as he’s a US citizen.

Antarctica also advised South Africa’s Oceana Group on its 2015 deal for Daybrook Fisheries, a US fishing menhaden and processing it into fishmeal and fish oil.

At the moment, Antarctica is selling Peter Pan Seafoods for Maruha Nichiro. In addition to the ongoing Peter Pan sale, Antarctica has also just advised Bristol Bay Native Corporation on its acquisition of Pacific cod longline firms Clipper Seafoods and Blue North, as well as the sale of trout farmer Clear Springs Foods on its sale to smaller rival Riverence.

Up for sale after ‘several offers of interest’

Clearwater has received “several offers of interest”, hence the need to explore a sale, the company said last week.

“Strategic options may include, but are not limited to, a sale of all or a material portion of Clearwater’s assets, either in one transaction or in a series of transactions, the outright sale of Clearwater, a merger or other transaction involving Clearwater and a third party, joint ventures, licensing arrangements, various financing alternatives or other significant transaction,” the company said.

The company has formed a committee of independent directors “to solicit, consider and evaluate various strategic alternatives available”. Stewart McKelvey will be the legal advisor in the process.

Strong harvests, sea cucumbers lift Q4 sales, earnings

The news of the sale process comes after stronger harvests and supplies of clams, scallops and langoustines and the introduction of sea cucumbers lifted Clearwater fourth quarter 2019 sales and earnings.

And having secured its full surf clam quota, Clearwater is set to boost its bottom line even further in 2020, the Bedford, Nova Scotia, shellfish harvester said on March 3.

The company’s Q4 2019 sales rose 4.6% year-on-year to CAD 167.1m and its adjusted earnings before interest, taxes, depreciation and amortization rose 10.1% y-o-y to CAD 10.5m.

“Strong harvest conditions, landings and available supply in clam, scallops and langoustines were partially offset by competitive market conditions for certain scallop sizes,” the company said in a press release. “Sales benefited from the introduction of sea cucumber in 2019, while shrimp was negatively impacted by the timing of landings, sales mix and competitive market conditions.”

Source: Undercurrent News