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FISHING: Merger in Tiger's Fishing Ventures?


Recent Western Cape Business News

SHOULD the two Tiger Brand controlled fishing operations – Sea Harvest and Oceana Fishing Group – be merged?

Speculation of such a corporate event followed a cautionary announcement issued by Oceana in June last year – warning its shareholders the group had entered into negotiations which, if successfully concluded, could have a material effect on the price of its shares.

At the time of the first notice there was some media speculation that Oceana may be looking to merge (or rather take-over) its smaller corporate cousin, Sea Harvest. Tiger owns 74% of Sea Harvest and 45% of Oceana, while Brimstone Investment Corporation is the empowerment partner for both businesses.

At the end of 2007 the Oceana cautionary notice was withdrawn.

Whether proposals for such a merger are on the table, delayed or ever existed is not known at this stage.

Perhaps the need for parent company Tiger Brands to concentrate on the unbundling of its pharmaceutical interests may have forced efforts to merger Sea Harvest and Oceana onto the back-burner.

On paper, such a deal makes a lot of sense. Oceana is a widely diversified fishing operation, while Saldanha-based Sea Harvest is mainly a hake specialist.

The hake business has been tough, but hake is the one area where Oceana does not have a sizeable presence (mainly exporting frozen hake through Blue Continent Products).

Obviously bringing the two businesses together would offer major opportunities for unlocking efficiencies, cost savings and a more efficient and coherent marketing drive around both companies’ valuable brands in pilchard and hake.

Currently it would seem Sea Harvest may fare better tucked within Oceana, which has managed to ride out the tough times in the fishing industry without taking too much strain on its income statement.

The difference in performance between Sea Harvest and Oceana is quite startling. Oceana reported a 63% increase in earnings per share for the six months ending March 2008.

Oceana’s much improved results came on the back of increased sales of canned fish, improved export realisations and higher cold store occupancy levels.

By contrast Sea Harvest recorded a decline in operating income despite strong turnover growth. Sea Harvest’s results were hit by lower catch rates and increased costs - particularly in relation to fuel and cold storage.

But it’s not all doom and gloom at Sea Harvest. Recently Brimstone – reporting its annual results to end June 2008 – pointed out that Sea Harvest remained ahead of the previous year and budgeted operating profits.

Brimstone said Sea Harvest was growing market share despite spiralling fuel costs and a global economic slowdown – noting that improved winter catches and higher export realisations were offsetting the impact of higher fuel costs.

Still, one gets the feeling that Sea Harvest could benefit from Oceana’s astute management and enjoy the security of being part of a diversified seafood conglomerate instead of chugging along as a vulnerable hake player.

Combining Sea Harvest and Oceana would also offer an opportunity to tweak the group’s empowerment credentials.

Brimstone – which has also been tipped as a BEE partner for Tiger Brands - probably would be more inclined to hold a single stake in an enlarged fishing entity.

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