High Liner Foods Inc. has struck an agreement to buy Icelandic Group’s U.S and Asian operations in a deal that will double the fish processor’s U.S. business and make it North America’s biggest seafood supplier to restaurants, schools and hospitals.
The Nova Scotia-based seafood company said Thursday the $230.6-million (U.S.) acquisition includes Icelandic USA’s processing plant in Newport News, Va. The deal gives High Liner access to the large U.S. food service market, where it was competing against Icelandic Group.
“It’s a big, challenging competitive market and this acquisition will make us a leader in U.S. food service,” president and chief executive Henry Demone said in an interview from Lunenburg, N.S. “We’re already the leader in Canada.”
Icelandic Group’s U.S. subsidiary has 864 employees. Mr. Demone said roughly 450 employees are at the Virginia processing plant, which is “very much part of our future.”
Despite an uncertain economy, he said both companies have a track record of growing and improving earnings.
“Even in slow times, the restaurant market in the U.S. is an enormous market and accounts for about three-quarters of seafood consumption,” Mr. Demone said. “So to be a leader in this market is a great strategic advantage for this company.”
High Liner, whose well-known brands include High Liner, Fisher Boy, Mirabel and Sea Cuisine, is also acquiring a plant in China and companies that buy fish from other Asian countries.
Icelandic’s American subsidiary had sales of $268-million for the 12 months ending in September and with the acquisition, High Liner expects to double its U.S. business. About half of the company’s 2010 sales of $585-million came from the U.S.
The U.S. value-added seafood market is made up of fish and seafood products with sauces, glazes and crumbs that are ready to cook and are sold to restaurants, hotels, schools and other institutions.
High Liner said Icelandic provides high-quality seafood in popular forms, such as battered and breaded products, as well as a full line of premium fillets.
High Liner now becomes the main player in the U.S. market when it comes to supplying restaurants, hotels and institutions, Octagon Capital Corp. analyst Bob Gibson said.
High Liner paid less than he was expecting for the acquisition and will have some “decent” synergies, both long-term and short-term, Mr. Gibson said.
High Liner said it expects near-term synergies of $12.1-million and ongoing annual synergies in the range of $16-million to $18-million.
The company will also acquire several brands as part of the agreement, and has signed a seven-year royalty-free licensing agreement to use the Icelandic Seafood brand in the United States, Canada and Mexico.
The transaction is expected to close in late 2011 or the first quarter of 2012.
Earlier this year, High Liner had announced an interest in buying all of Icelandic, which is a major seafood supplier in Europe as well as a large seller of fish products to U.S. food service market.
Icelandic’s owner is the Enterprise Investment Fund, a pool of capital created by pension funds to help restructure the economy after the collapse of Iceland’s financial system and the failure of its major banks in 2008.
Finnbogi Jonsson, chief executive of the Enterprise Investment Fund, said the sale further streamlines and strengthens the financial position of Icelandic Group.
“We will use the remaining cash to lower the Group’s debts further and to return part of the initial investment to the pension funds and other owners of the Enterprise Investment Fund,” Mr. Jonsson said in a statement.
Herdis Fjeldsted, chairman of the Iceland Group, said Icelandic producers will continue to have access to North American markets under the deal.
“Services to Icelandic producers are an important element of our operations, and our distribution agreement with High Liner will ensure continued access for Icelandic producers to the North American markets,” Ms. Fjeldsted said.
Mr. Demone said High Liner is the No. 4 brand in the U.S. retail market, but in terms of volume sold it’s probably the No. 2 brand because of its big private label seafood business.Report Typo/Error
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