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Colin MacDonald, seen here in 2007, has made it clear he and co-founder John Risley are willing to sell.

Paul Darrow/The Globe and Mail

A battle for dominance in Canada’s East Coast fisheries is playing out, as rival food companies weigh $450-million-plus bids for Clearwater Seafoods Inc., the country’s largest owner of licences to harvest lobster and shellfish.

Clearwater’s board of directors put the Halifax-based company up for sale last week by launching a strategic review after Clearwater “recently received several expressions of interest” from potential buyers, according to a press release. Clearwater’s board said options under consideration include sale of all or part of the company, or a merger.

Bidders are expected to include publicly traded Premium Brands Holding Corp., a specialty food producer, and privately owned Cooke Aquaculture Inc. of Blacks Harbour, N.B., which made an unsuccessful offer for Clearwater in 2011, according to analyst Doug Cooper at Beacon Securities. Mr. Cooper said private equity funds will also consider a takeover after Clearwater’s stock price dropped by more than 15 per cent in recent weeks, in part due to concerns that the novel coronavirus outbreak will cut seafood sales.

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“If COVID-19 is a short-term issue, this could be a perfect time for an opportunistic bid for Clearwater, especially as it is coming off a record year with its leverage ratios at five-year lows,” said Mr. Cooper.

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 an interview last week with Halifax’s Chronicle Herald newspaper, Mr. Risley said: “COVID-19 is a temporary phenomenon. [Clearwater’s strategic review] process is likely to be a several-month process and extend well beyond whatever temporary effect COVID-19 is having on markets.”

Clearwater’s market capitalization was $372-million, based on its $5.71 per share closing price Friday on the Toronto Stock Exchange. Analyst George Doumet at Scotia Capital Inc. said in a report the company could fetch up to $470-million in a contested takeover. Clearwater posted a $53-million profit on sales of $616-million in 2019.

“The seafood mergers and acquisitions space has been very active in the last few years,” said Mr. Doumet. “We highlight that if a transaction were to occur, it would have to be majority Canadian-controlled.”

Clearwater bills itself as the largest domestic 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 entities that are majority Canadian-owned. Analysts said Clearwater could attract interest from a domestic company with an international minority partner.

Premium Brands is based in Richmond, B.C., and chief executive George Paleologou has built a business that sells $3-billion of food annually, including $480-million of seafood, by doing 61 acquisitions worth a total of $1.8-billion over the past 15 years. The company’s brands include Ready Seafood, a Maine-based lobster producer; Diana’s Seafood; and Hub City Fisheries.

Family-owned Cooke Aquaculture has operations in Atlantic Canada, the United States, Spain, Chile and Scotland, with a focus on fish farming. The company offered to buy Clearwater for $3.50 per share nine years ago, a bid that was rebuffed by Clearwater’s board and valued the company at seven times its annual earnings before interest, taxes, depreciation and amortization (EBITDA). Scotia’s Mr. Doumet said successful takeovers in the seafood industry are playing out at valuations of eight to 10 times EBITDA.

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Spokespersons for Cooke Aquacluture and Premium Brands declined to comment on their potential interest in Clearwater. Christine Penney, vice-president of Clearwater, also declined to comment on the review, and said in an e-mail: “For the operations of the company this is ‘business as usual.’ The announcement does not result in any changes to current work plans, projects, locations or employment.” An independent committee of Clearwater directors hired investment bank RBC Dominion Securities Inc. and law firm Stewart McKelvey last week to run the strategic review.

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