Premium Brands Holdings Corp. and a group of Mi’kmaq First Nations, led by Membertou First Nation, are jointly buying Clearwater Seafoods Inc., a partnership that will facilitate the largest investment in the Canadian seafood industry by an Indigenous group.
Halifax-based Clearwater is the largest holder of shellfish licences and quotas in Canada, and in March the company announced a strategic review. Late Monday, Premium Brands announced it is teaming up with the group of Mi’kmaq First Nations to acquire Clearwater together for $8.25 a share in cash, which equates to a market value purchase price of $537-million.
The joint venture will be equally owned by food supply giant Premium Brands of Richmond, B.C., and the coalition of Mi’kmaq First Nations on the East Coast. “This is a transformational moment for all the participating Mi’kmaq communities,” Chief Terry Paul of Membertou First Nation said in an interview.
The transaction relates to offshore fishing and is not connected to the “moderate livelihood” inshore fishery that has been at the centre of conflict between Mi’kmaq and non-First Nations lobster fishermen in recent months.
“This is strictly a commercial transaction and our investment in a commercial offshore fishery is completely separate from our commercial inshore and moderate livelihood fisheries,” Mr. Paul said. “We are still incredibly committed to our other fisheries and to our communities on the moderate livelihood fishery.”
Clearwater had a market value of $470-million at the end of trading Monday, and the acquisition price pegs Clearwater’s total value, including debt, close to $1-billion.
The purchase price represents a 14-per-cent premium to Clearwater’s closing price Monday – and a 60-per-cent premium to Clearwater’s weighted-average stock price before the strategic review was announced. The company’s share price had fallen in recent years, and before the deal’s announcement Clearwater was worth roughly half of its 2016 value.
Premium Brands has grown from a local purveyor of pork to a North American powerhouse that does business with Starbucks and controls more than 40 brands of meats and seafood. It also supplies The Keg and Boston Pizza restaurant chains.
The company is known as a serial acquirer that scoops up smaller businesses, such as Oberto Sausage Co. and Buddy’s Kitchen, and folds them into a larger conglomerate. Premium Brands' share price has soared 168 per cent over the past five years.
Over time, Premium Brands has shown its interest in acquiring seafood companies, having purchased Ready Seafood, Maine Coast, and recently Allseas Fisheries. While it is rare for a company of Clearwater’s size to become available, there had been some apprehension from analysts about the acquisition after rumours of it spread over the past month.
“Premium Brand’s balance sheet is in its best shape in more than two years,” CIBC World Markets analyst John Zamparo wrote in a recent note last week after the company reported strong quarterly earnings. “We support ongoing M&A, but believe that more attractive opportunities exist.”
Many of Premium Brands' acquisitions have been funded with debt, which has hurt its leverage levels in the past. To help allay any debt worries this time around, Premium Brands is selling $200-million of new shares in a bought deal financing to help fund the Clearwater deal. Canada Pension Plan Investment Board has also agreed to purchase an additional $50-million. CPPIB originally invested $200-million in Premium Brands for a 7.1-per-cent stake in May, 2019.
The seven participating Mi’kmaq communities in Nova Scotia and Newfoundland and Labrador will be financing their portion of the deal through a $250-million loan arranged by the First Nations Finance Authority, a not-for-profit organization established by the federal government and run by Indigenous groups to improve access to capital for First Nations communities.
Premium Brands did not return a request for comment, but in a statement chief executive officer George Paleologou said the company is “pleased to be playing a role in this historic opportunity to significantly enhance First Nations' participation in Canada’s East Coast commercial fisheries.” In a statement, Clearwater said the acquisition is supported by 64 per cent of shareholders.
With a report from Andrew Willis in Toronto
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