FISHING: Tide Is Turning For Consolidation
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THE tide may have finally turned for the Cape's fishing sector…not so much regarding the performance of company operations but rather in the fact that the first real signs of consolidation in the sector are plainly visible.
Observers in the fishing sector have argued vociferously that deal-making for consolidation is long overdue, even though government’s empowerment concerns appear to limit potential tie-ups.
While Brimstone’s Sea Harvest and Sekunjalo’s Premier Fishing – both adequately empowered - would seem the logically conduits for parties seeking consolidation, it was the sector’s biggest fish Oceana that has got the ball rolling.
Oceana finished 2011 putting finishing touches to a deal that will see it buy the Fernandes family’s well known Lusitania operations.
Oceana will buy Lusitania’s hake, horse mackerel and south coast lobster fishing rights and related assets (including cold storage facilities). The transaction is subject to the approval of the Minister of Agriculture, Forestry and Fisheries as well as the Competition Commission. Consequently Oceana may only bank the deal in March this year.
It’s not clear what Oceana paid for Lusitania. But the deal represented less than 5% of Oceana’s current market capitalisation of R5 billion – meaning less than R250 million.
What Oceana did disclose was that Lusitania will increase its interest in the hake industry from 1.1% to 4.4%, in horse mackerel from 18.8% to 22.8% and in south coast from 3.1% to 22.3%.
While extra horse mackerel catch adds bulk to one of Oceana’s most profitable operations, it’s undoubtedly Lusitania’s south coast lobster quota that offers the biggest value in terms of add-ons.
Oceana already makes a fair turn from its west coast lobster operations and will now have a sturdier leg in south coast lobster - even ranking as a fairly substantial rival to market leader, Premier Fishing. (In fact, CBN wonders whether Premier Fishing was ever in the running to buy Lusitania?)
Premier Fishing’s recent results suggest the international market for south coast lobster is improving markedly. Revenues (and profits) from south coast lobster could also benefit from a weaker rand/dollar exchange rate.
Another transaction that the old salts will keep their eyes on in the months ahead is the proposed sale of FoodCorp’s fishing division, Marine Products.
This division, which distributes the Marpro brand for hake, monkfish, kingklip and rock lobster – has purportedly been sold for R600 million – but Foodcorp has declined to identify the buyer until all conditions precedent have been met.
The buyer is unlikely to be Oceana (whose empowerment credentials don’t match up to Pamodzi-owned Foodcorp) or Premier Fishing (whose parent, Sekunjalo, perhaps can’t yet afford to fork out R600 million on an acquisition).
Smart money would be on Brimstone, which would probably be keen to diversify Sea Harvest’s hake line. But there is also talk of a private equity netting Marine Products, and – who knows – perhaps looking at dropping bait for other sizeable fishing ventures.
In any event, there seems every chance that the Lusitania and Marine Products deals may well be precursors to some more manoeuvres on the high seas in 2012. (see ‘What’s on the shelf for 2012’ in this issue, page 1)
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