Japan’s Maruha Nichiro and two community development quota (CDQ) groups in the US state of Alaska have acquired the whitefish harvesting and processing assets that Canada’s Cooke obtained with its 2016 purchase of Icicle Seafoods.

Maruha Nichiro and its CDQ partners, Coastal Villages Regional Fund (CVRF) and Norton Sound Economic Development Corporation (NSEDC), formally announced the deal on Tuesday, Feb. 1, the prospect of which was first reported by Undercurrent News.

According to a press release from the groups, the deal includes nine fishing vessels and “shared ownership” of 4% of the total Bering Sea pollock quota — thought to be around 60,000 metric tons, the Northern Victor and a “stationary processing plant permanently moored in Dutch Harbor”.

The fleet of catcher boats are part of the Northern Victor Fleet Cooperative, which in 2020, harvested 61,008t of a pollock allocation of 66,018t, according to a public report from the cooperative. The cooperative is made up of 14 vessels landing into the Northern Victor plant, with eight minority-owned by Cooke’s Icicle.

“Maruha-Nichiro is pleased to be able to expand our partnership with NSEDC and Coastal Villages Region Fund. This new opportunity will allow us to enhance the value of service we bring to all our stakeholders: customers, business partners, shareholders, employees and the local communities where we operate,” MarkJoHahnson, president of Westward Seafoods was quoted as saying.

Today marks another milestone in our longstanding pursuit of NSEDC’s vision to increase our ownership in Bering Sea fisheries, from which our company was formed and has built upon to deliver meaningful benefits to our member communities,” Frank Katchatag, NSEDC’s chairman said.

The terms of the sale, which was managed by US seafood-focused advisoryAntarctica Advisors and began in 2020, were not disclosed. Sources previously told Undercurrent that the deal would likely bring a price tag somewhere in the $180million to $200m range.

The two CDQ groups — which use fishing and other revenues to support residents in a swathe of remote coastal Alaskan communities — already have several investments in the Alaska pollock fishery, including one with Maruha Nichiro.

The transaction marks the third major piece of pollock dealmaking in recent months after NSEDCbought a majority position in Glacier Fish Company (GLC) and Trident Seafoods acquired the Starbound factory trawler and two catcher boats from Aleutian Spray Fisheries.

Cooke CEO Glenn Cooke said in a statement made to Undercurrent News that the company chose to exit the pollock business to better serve “customer needs” with a focus on “higher value-added seafood resources such as salmon, sea bass and seabream, crab, scallops and shrimp”.

Cooke promised more seafood dealmaking to come for the company.

“We are targeting more acquisitions to expand our global wild and farmed subsidiaries including launching a new frozen at sea whole shrimp trawler in southern Argentine waters for the 2022 season,” he said.

Maruha’s partnership

Partnering again with the CDQ groups means Maruha Nichiro can overcome US foreign ownership rules in fishing, sources said. As a foreign company, MaruhaNichiro can only own up to 25% of the Northern Victor coop’s vessels and licenses.

There is no limitation on how much foreign companies can own on the land-based processing and sales side, however. So, Maruha Nichiro could control 100% of Northern Victor, which processes the pollock from the coop’s catcher vessels. Canada’s Cooke also directly owns under 25% of the Northern Victor catcher boats, but owns the processing plant outright, sources said.

The deal will deepen the relationship between the Japanese giant, which has over$8 billion in sales and operations around the globe, and the two CDQ groups.

Back in 2011, NSEDC subsidiary Siu Alaska Corp. joined with CVRF to acquire the fishing assets of Seattle-based Wards Cove, using a joint venture named BSAIPartners.

The press release stated that the transaction was carried out by BSAI Ventures, which includes CVRF and NSEDC as joint 75% owners, and Maruha CapitalInvestment, which owns the rest.

According to the most recent NSEDC annual report for 2020, Marua Nichiro is a”minority owner” in BSAI, which owns six pollock trawl catcher vessels and the associated quota. Five of these vessels, the Alaska Rose, Bering Rose, Sea Wolf, Destination, and Great Pacific, “actively participated in the Bering Sea pollock fishery in 2020”, the report states. The vessels are operated by the Alaska Boat Co.

The Alaska Boat vessels fish as part of the Unalaska Fleet Cooperative and deliver their catch to Maruha Nichiro’s Alyeska Seafoods plant in Dutch Harbor. In 2020, the five vessels harvested over 123m pounds of pollock and nearly 900,000 pounds of Pacific cod. The company “had another very profitable year in 2020”, according to the report.

For Tokyo-based Maruha Nichiro, the world’s largest seafood company, the deal would add to its already considerable presence in Alaska pollock at a time when theUS total allowable catch (TAC)
is coming down by close to 240,000t in 2022.

The group, according to its website, boasts a 27% share of the pollock market inNorth America. Companies majority and minority-owned by Maruha Nichiroalready harvest and sell around 300,000t of pollock. Maruha Nichiro’s Alyeska and Westward Seafoods plants process 13.8% of the overall TAC for the fishery, which was around 204,000t in 2021.

As well as the Alyeska and Westward plants, Maruha also owns surimi maker Trans-Ocean Products and Premier Pacific Seafoods, the sales company for PhoenixProcessor Limited Partnership, which operates the Seattle, Washington-based motherships Phoenix and Excellence. Maruha Nichiro owns minority stakes in both vessels, as well as a minority stake in Golden Alaska, a mothership that has 4.1% of the TAC.

Maruha Nichiro also has minority interests in a fleet of catcher vessels landing at its plants via Westward Fishing Co., run by Greg Baker and Marcus Alden. WestwardFishing oversees the administration and operations of five US flag catcher vessels; Alaskan Command, Chelsea K, Pacific Knight, Viking and Westward I.

Maruha Nichiro has been involved in the Alaska seafood space for decades, although this took a notable turn on Dec. 31, 2020. That’s when the Japanese firm unloaded its struggling Peter Pan Seafood Company salmon processing operation to a group of investors including Rodger May of Alaska distributor NorthwestSeafood Company and US private equities McKinley Capital Management and RRGCapital Management. Sources identify ed that group as competing with the Maruha/CDQ interests for the Cooke whitefish assets before the former emerged as the frontrunner.

For Cooke, the sale marks an exit from pollock harvesting, a space it entered with the purchase of Seattle-based Icicle, which described itself as a “miniconglomerate” in the seafood space.

In addition to the whitefish harvesting and processing assets, Icicle brought Atlantic salmon farms in the state of Washington to Cooke, which the company is converting to raise steelhead and sablefish, and several shoreside processing plants focused on Alaska salmon. Cooke spun off the plants in a deal with Seattle-basedOcean Beauty Seafoods to create the Alaska processing venture OBI Seafoods.

Like Maruha Nichiro’s sale of Peter Pan, the OBI deal came as mid-sized Alaskaprocessors have been losing market share amid consolidation in the sector and a fierce rivalry between sector titans Trident Seafoods and Silver Bay Seafoods that has
spurred consolidation and modernization in the space.

 

 

With plenty of ‘dry powder’ to detonate, private equity funds are competing with each other and the seafood industry itself for deals.

A growing number of the world’s investors are waking up to something only a small group of private equity funds, trade buyers, venture capitalists and M&A advisors have known for years: there’s big money to be made in seafood.

The race is on, and the accelerating rate at which private equity firms in particular are investing in the seafood sector shows that fund managers recognize the industry — processing, fisheries, aquaculture and equipment — has all the right drivers.

Simply put, there is a lot of demand for capital in the seafood industry, and private equity funds have more cash to deploy than ever.

Private equity firms are benefiting from market tailwinds triggered by historically low interest rates and record fundraising.

In the US alone, private equity “dry powder” — the amount of money funds have to invest — is at an estimated $150.1 billion (€132 billion), according to PWC’s Private Equity 2021 Mid- Year Outlook.

And that dry powder is being put to use. Private equity-backed M&A deals more than doubled to a record $818.4 billion (€722 billion) in the first nine months of 2021, up from $315.2 billion (€278 billion) last year, according to Reuters.

Birgir Brynjolfsson, a partner at Antarctica Advisors, a boutique M&A specialist focused on the seafood sector, said the trend in private equity is coinciding with a growing need for investment in everything from new technology to new vessels, facility upgrades and consolidation.

With underlying assets that appreciate in value — plants, vessels, fishing quotas and licenses — and a growing demand for its products, the seafood industry has become “very attractive” to the sector, Brynjolfsson said.

Getting more aggressive

Ten years ago, Antarctica Advisors was knocking on the doors of private equity funds trying to introduce them to seafood as an investment opportunity. It took a lot of time, effort and salesmanship, and for the most part few funds took the plunge.

“Today we are in a position where we are getting the phone calls from the different private equity funds asking us for opportunities,” said Brynjolfsson.

While big names have invested in the sector in the past — Altor, Bain, Permira and Carlyle to name a few — the trend has accelerated over the last few years.

In October, the $6 billion US private equity fund ACON snapped up US scallop supplier Northern Wind plus two small Canadian lobster companies in a deal advised by Antarctica.

Last month, private equity group Paine Schwartz, the former owner of Alaska processor Icicle Seafoods, acquired a 50 percent stake in Hendrix Genetics, the owner of shrimp and salmon egg, smolt and broodstock suppliers, including Kona Bay, Troutlodge and Landcatch.

There is no single reason that could be considered a turning point for the uptick in interest, but rather there are a combination of factors, Brynjolfsson said.

With more capital being allocated to private equity, these funds have to look further afield for interesting opportunities, and seafood is, to many of them, new territory.

In addition, some segments of seafood are now emerging as a potential fit for funds investing in sustainability focused companies.

And most importantly, seafood consumption — the No. 1 driver of the sector — is growing and shows no sign of declining.

The typical lifespan

Typical private equity funds have a limited life cycle, and look to deliver a return to investors and sell off their stake in a company within 5-7 years.

Whether the limited life cycle of a private equity fund is long enough for it to make a significant difference depends on where it invests in the sector and value chain, however, and some investors have paid significantly for not understanding the subtle nuances of the sector.

“In some case 5-7 years is an acceptable period, but in other cases you may not achieve what you wanted to achieve in that period because of external factors out of your control,” said Brynjolfsson.

Magnus Bjarnason, managing partner at Iceland-based advisory firm Mar Advisors, noted that the sometimes unpredictable nature of some segments of the seafood industry, especially fisheries and aquaculture, can make private equity’s timeline too short.

“Seafood is a tremendously profitable sector, but it is also cyclical … and these cycles make it difficult for private equity to get used to,” Bjarnason told IntraFish.

While Bjarnason does see private equity activity picking up, he sees equally strong growth in institutional capital and pension and family funds, whose longer horizons are sometimes a better fit.

Part of private equity’s challenge is that shaking loose owners from their stakes can be difficult in the seafood industry, where private ownership is higher than in most other sectors, and founding families and their descendants can be strongly committed to their businesses, Bjarnason noted.

That is giving rise to a hybrid model where investors essentially partner with private owners, with both bringing assets the other party doesn’t have: money, and expertise.

A battle for buys

While private equity funds increase their activity in seafood, existing large seafood companies with the means to acquire and consolidate have been more passive of late.

Ignacio Kleiman, managing partner at Antarctica, said the pandemic forced many potential trade buyers to look inwards and handle the challenges of day-to-day operations, which for some companies was the right move.

“There was a lot of organic growth, and good margin expansion because demand was strong, so I think that made them happy,” Kleiman told IntraFish.

The year prior, when the reality of the pandemic first set in, the economic uncertainty and inability to travel had a chilling effect on industry consolidation.

“A lot of deals were put on hold, or they slowed down, or they died because of the inability to travel,” said Kleiman.

“It is very difficult to make a large investment decision if you are not able to thoroughly kick the tires in person. That affected volume in 2021 [and] I think in 2022 the picture is going to be substantially different.”

Private equity tends to follow the deals, and move into sectors where competing funds are active.

Additionally, when funds buy into a company, the strategy is often to grow that company both organically and through add-on acquisitions, so it stands to reason more deals will be forthcoming.

“This is definitely the beginning of something more that is coming, no doubt about that,” said Antarctica’s Brynjolfsson. “We’ve never been busier.”

November 1, 2021 – Antarctica Advisors LLC, the leading Seafood Industry-focused M&A advisory firm, acted as the exclusive investment banking advisor to Mitsui & Co. (U.S.A.), Inc. (“Mitsui”), in the sale of the assets of Mitsui Foods, Inc. (“MFI”) to Gellert Global Group’s (“GGG”) Atalanta Corporation.

MFI is a leading importer and distributor of canned and frozen seafood as well as canned fruit and vegetables, that dates back to1953.  Since then, Mitsui Foods has been importing fine grocery and specialty food products from around the world under various brands. These brands, including the EMPRESS® brand, will be integrated across the Gellert Global Group divisions, including Atalanta Corporation and Camerican International.

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October 14th, 2021 – Antarctica Advisors LLC, the leading Seafood Industry-focused M&A advisory firm, acted as the exclusive investment banking advisor to Northern Wind Inc. (“Northern Wind”), one of the leading scallop processors in the US, in its sale to ACON Investments LLC (“ACON”), a Washington, DC private equity fund with global presence and over $6.0 billion in raised capital. The acquisition of Northern Wind is an integral part of ACON’s strategy to build a newly minted North American sustainable seafood processor and distributor, Atlantic Sustainable Catch (“ASC”).

Northern Wind is a leading producer of scallops and other premium seafood, serving some of North America’s largest retailers. Ken Melanson and Mike Fernandes founded the company in 1987 and continue to oversee the business’s operations today. Northern Wind has 150 employees across three locations in New Bedford, Massachusetts.

As part of the transaction, existing owners and the management team will continue to provide leadership at ASC and will be meaningful shareholders and partners alongside ACON.

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With retail sales booming, processing consolidation will likely form the cornerstone of this year’s mergers and acquisitions (M&A) business, a trio of advisors told Undercurrent News.

Existing sector players, outside investors and alternative proteins are all likely to be pursuing closer retail access in the post-pandemic market, the M&A experts said.

When it comes to the processing sector, it’s here that you see the most fragmentation and the most family-owned businesses, according to Rabobank analyst Gorjan Nikolik. Combined with the

loss of demand for whole fish, that makes it an area ripe for consolidation.

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