Clearwater Seafoods Inc. is weighing a takeover offer backed by East Coast First Nations after striking what was billed as a “historic” deal last month to sell lobster licences to a Nova Scotia Indigenous group.
Halifax-based Clearwater fielded at least three bids that value the company at approximately $1-billion, according to investment banking sources, analysts and media reports, after launching a strategic review in March that is expected to result in the company’s sale.
The leading contender is Premium Brands Holdings Corp., according to sources that include seafood industry publication Undercurrent News. The Vancouver-based company’s offer includes roles for Newfoundland’s Miawpukek First Nation and the Membertou First Nation of Nova Scotia. The other bidders are the Ontario Teachers' Pension Plan Board and privately owned Cooke Aquaculture Inc. of Blacks Harbour, N.B., which made an unsuccessful offer for Clearwater in 2011.
While none of the parties would comment directly Monday on the auction process, Clearwater said in a press release the review “is continuing in earnest.”
“Premium Brands has shown interest in the seafood arena with the purchases of Ready Seafood, Maine Coast, and recently Allseas [Fisheries] – putting [management] on pace to generate $800-million of revenues from this vertical,” said analyst George Doumet at Scotia Capital Inc. in a report on Monday. “The acquisition of Clearwater would put them well above their $1-billion target.”
The bidding war comes at a time when First Nations groups in Nova Scotia are in conflict with some non-Indigenous commercial fishing companies over the right to harvest East Coast lobster. In contrast, Clearwater has forged strong ties to Nova Scotia Indigenous businesses.
In September, the Cape Breton-based Membertou paid $25-million to acquire two of Clearwater’s eight lobster licences. “Membertou is pleased to make this historic strategic investment in the sustainable and well-managed offshore lobster fishery," Chief Terry Paul said at the time. "It further strengthens our relationship with Clearwater, leverages their expertise in offshore fisheries, and builds value for our community.”
In announcing the Membertou sale, Clearwater chief executive Ian Smith echoed the Chief’s sentiment. "This transaction serves as a model of co-operation, with the commercial fishing industry and First Nations working together as equal partners to build value and opportunity for local communities.”
Clearwater bills itself as Canada’s largest holder of shellfish licences and quotas, with permits to harvest lobster, clams, scallops, crab and shrimp, along with licences to harvest scallops in Argentina. The federal government’s Fisheries and Oceans licensing policy requires that Canadian fishing licences be held by domestic entities.
Premium Brands' strategy is to acquire food producers, then cross-sell their products to its clients, which include grocery chains, food service companies and restaurant chains. Seafood accounted for 15 per cent of the company’s $3.7-billion in sales last year. Over the past 15 years, Premium Brands chief executive George Paleologou and his colleagues committed $1.2-billion to 62 transactions.
Buying Clearwater would be Premium Brands' largest acquisition to date and would boost its earnings per share by about 15 per cent, according to analysts. “We find it interesting that since our last update, Premium Brands raised $300-million in equity as well as a $150-million debenture," Doug Cooper at Beacon Securities Ltd. said in a recent report. "Premium Brands has indicated in the past it is interested in growing its seafood sales.”
Clearwater co-founders John Risley and Colin MacDonald, who started the business out of the back of a pickup truck in 1976, control the company and have made it clear that they are willing to sell. In March, a committee made up of Clearwater independent directors hired RBC Dominion Securities Inc. and law firm Stewart McKelvey as its advisers.
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