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N.B. fish farming firm bids for Clearwater

An aggressive New Brunswick-based fish farming company has proposed a takeover of one of Atlantic Canada's iconic companies, Clearwater Seafoods Income Fund.

Cooke Aquaculture Inc. already owns about 20 per cent of the fund's units, but it wants to buy the rest of Clearwater for $3.50 a unit, a transaction that would cost it about $200-million, including the price of ancillary securities such as convertible debentures.

There's one huge hurdle though. Clearwater's founders, well-known businessmen Colin MacDonald and John Risley, want nothing of the deal. Through their private company Clearwater Fine Foods Inc., the two of them control more than 48 per cent of the votes at the income fund, mainly through shares with special voting rights, and they say they will not sell. Mr. MacDonald's brother Mickey controls another 10 per cent of the votes, providing them with means to block the proposal.

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Mr. MacDonald said in an interview Friday that he and Mr. Risley are "committed long-term holders" of the trust.

At the same time, "we feel we have the responsibility to unlock the full value to the unitholders," and the company is worth far more than $3.50 a unit, he said. "Right now we are seeing significant improvement in results, and forecasted continued improvement."

Mr. MacDonald said the fund's trustees have hired independent legal and financial advisers to help provide a full evaluation of Cooke's proposal.

Cooke has not tabled a formal offer to unitholders, but it unveiled its proposal in a letter to the fund's trustees late in July. In a statement yesterday, Cooke pointed out that Clearwater has not traded above $2 a unit since 2008, and that its offer is at a substantial premium to the recent price.

Clearwater's units have been trading at around $1.50 in recent weeks, although they jumped substantially after the news of the proposed takeover was released Friday, closing at $2.43, up 57 per cent.

Cooke spokeswoman Nell Halse said combining the two companies would create a powerful new entity in the Canadian fishing and seafood industry. She said the Cooke offer is at a "good premium and is very good for shareholders."

Cooke was founded in 1985 by its current chief executive officer Glenn Cooke, along with his father and brother, when they set up a small salmon farm in New Brunswick. It has expanded sharply through acquisitions, and now has about 2,000 employees and annual revenue of about $450-million. The company operates in New Brunswick, Nova Scotia, PEI, Quebec, Newfoundland and Maine, and owns subsidiaries in Chile.

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Clearwater was founded in 1976 when Mr. MacDonald and Mr. Risley began selling lobsters out of a pickup truck. It also grew dramatically by acquisition, and went public as an income trust in 2002. While the units rose above the $10 issue price for a couple of years, they have been languishing below that since 2004 as the company faced various financial and market challenges.

In 2008, Mr. MacDonald and Mr. Risley hatched a plan to take Clearwater private again, but the Icelandic bank that was backing the transaction collapsed just as the arrangement was about to close. A refinancing from government and private backers kept Clearwater afloat. The fund plans to convert from a trust to a public corporation this fall.

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