FISHING: Did Tiger Open The Sea For Deals?
Recent Western Cape Business News
THE FAILED merger between food giants Tiger Brands (the willing suitor) and AVI (the reluctant partner) may have thrown open the local fishing sector for a flurry of deal-making.
As a pre-emptive move (so as not to rattle the desk blotters at the Competition Commission) Tiger Brands sold its stake in hake specialist Sea Harvest to a consortium led by empowerment partner Brimstone Investments.
As CBN has previously pointed out the merger of Tiger Brands and AVI would have meant the housing of three large fishing companies – Oceana, Sea Harvest and I&J – under one roof. That situation would probably have raised a number of competitive issues.
Still, one can only wonder at what great synergies could have been unlocked if a Tiger Brands/AVI merger combined the Oceana and I&J operations.
CBN notes that I&J, which has endured a tough time of late, was instrumental in helping AVI boost profits at its Chilled and Frozen Convenience Brands division by 63% to R140.5 million.
AVI reported that I&J’s South African operations realised higher export prices as well as increases in local prices for seafood products. Coupled with improved catch rates and good processing efficiencies the improved prices impacted positively on its operating performance – even though hake volumes were lower because of the reduced quota allocations and lower demand from Europe.
While the proposed Tiger Brands and AVI deal fell through, Brimstone last month finalised its purchase of outright control of Sea Harvest.
The development does a fair bit to broaden ownership in the fishing sector with four distinct camps emerging. These are Tiger Brands with Oceana, AVI with I&J, Brimstone with Sea Harvest and Sekunjalo with Premier Fishing.
Interestingly, Brimstone still owns a significant minority stake in Oceana – a stake the empowerment company is unlikely to let go off quickly unless a great offer – and obvious purchasing partners would be Tiger Brands or another empowerment company – is put on the table.
More fascinating to watch, though, is whether significant corporate action will unfold in the fishing sector this year.
Oceana, which produced superb profits recently, has openly admitted that it is seeking new opportunities in the fishing sector.
Oceana’s parent, Tiger Brands, may be smarting that they have lost Sea Harvest, which has a strong presence in the branded frozen hake market.
Brimstone’s recent results also suggested that Sea Harvest had markedly improved its profitability. Sea Harvest contributed a not insubstantial R10.2 million to Brimstone in the form of dividends in the year to end December 2008.
Tiger Brands may now be forced to look aggressively for other fishing entities to merge into Oceana – and companies that offer new markets and brand building opportunities. A meaningful presence in hake would also be handy, considering Oceana is relatively ‘light’ on that front.
One would imagine that Premier Fishing – which itself is subject to persistent rumours that Sekunjalo is a willing seller – would sit in the middle of Oceana’s radar.
If Oceana grabbed at Premier it certainly would add a high end balance to Oceana’s portfolio by bringing in the former’s South Coast and West Coast lobster businesses as well as the fledgling abalone farming ventures (as mentioned in last month’s CBN). Premier also has some valuable hake quotas.
Premier – which recently acquired more abalone farming capacity – has also been making noises about expanding its operations via mergers, partnerships or takeovers of smaller fishing enterprises.
Premier has substantial production capacity and a willingness to start branding its products – things that may appeal to smaller fishing enterprises where allocations are often under-utilised due to working capital constraints.
Premier’s profit performance in the half-year to end February – which should be known within a few weeks – is also key. One suspects that jittery economic – especially in the US, Europe and the Far East – may have staunched demand and dampened prices for luxury foodstuffs like lobster.
Perhaps if Premier Fishing does come under some financial pressure in the months ahead it would see parent company Sekunjalo more accommodating of potential suitors.
Perhaps Sekunjalo would prefer talking to an empowerment company like Brimstone around Premier Fishing than squaring up to a conglomerate like Tiger Brands.
On paper, merging the operations of Premier (which also carries some rather valuable fishing rights) and Sea Harvest under he auspices of empowerment seems to hold some merit – especially in terms of diversifying the respective operations in local and international markets.
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