Atlantic Capes deal makes Northern Wind one of world’s three scallop titans
‘The main reason why we did it is obviously that they’re a big player in domestic and imported scallops and we’re a big player’ — Ken Melanson, Atlantic Sustainable Catch
Don’t look now but a giant scallop-shaped creature has risen off the coast of the US state of Massachusetts. It’s Northern Wind.
There were multiple motivations for Atlantic Sustainable Catch (ASC) to acquire the downstream division of Atlantic Capes Fisheries and fold it into its New Bedford, Massachusetts-based operation, merging two major US scallop producers to create one giant, Ken Melanson, ASC’s chairman and CEO, told Undercurrent News in an interview on Thursday (Jan. 16).
The deal gives Northern Wind — acquired by Washington, DC-based investment firm Acon and rolled into ASC in October 2021 — a much larger footprint in the scallop arena and makes better use of existing facilities, he said.
Northern Wind will now have combined production of about 20-22 million pounds (9,070-10,000 metric tons) of scallops annually, Melanson estimated. That includes roughly 10m lbs of domestically caught scallops and 10-12m lbs of imported scallops, he said.
That would account for roughly half of all the scallops sold in the US, based on National Oceanic and Atmospheric Administration (NOAA) landings data that shows 16m lbs harvested domestically and NOAA trade data that projects to roughly 26m lbs of imports in 2024.
At a minimum, such numbers would make Northern Wind one of the world’s three largest scallop producers alongside Eastern Fisheries and East Coast Seafood’s Seatrade International, which are also based in New Bedford, sources advised.
“The main reason why we did it is obviously that they’re a big player in domestic and imported scallops and we’re a big player,” Melanson said of the deal involving Atlantic Capes, adding: “With the quotas going to where they’ve been going, and they continue to go down, we’re at like 30% capacity in our facility here.”
The facility Melanson mentioned is Northern Wind’s 120,000-square- foot processing operation in New Bedford, which went through a major $12m expansion in 2019. It’s been upgraded practically every year since, he said.
By relocating Atlantic Capes’ scallop production out of its roughly 60,000-70,000 square foot processing facility in Fall River, New Jersey, the New Bedford plant instead will be able to operate at about 85% of its capacity, Melanson estimated. Fall River will be the plant used to handle other production, including especially co-packing and value-added products, he said.
“We close this deal, and there’s basically no CapEx that we need to do,” he said.
Another motivation for the acquisition was that the companies had little overlap. Melanson said Northern Wind was strong in club store, foodservice and wholesaler relationships, while Atlantic Capes had better ties with small supermarket chains and other retail outlets.
Melanson confirmed that the deal for Atlantic Capes makes ASC a roughly $500m-plus-turnover North American shellfish group as earlier reported by Undercurrent. The acquisition includes Atlantic Capes’ Galilean Seafoods, a large hand-shucking plant in Bristol, Rhode Island.
Overseeing the sale was Barry Cohen, a lawyer who took over as chairman of Atlantic Capes after the death of his brother, Danny, who built up the company. The family was guided in its sale by Antarctica Advisors, a seafood-focused corporate finance boutique, as earlier reported.
Also, as reported earlier, Jeff Bolton — a 21-year executive and the former CEO at Atlantic Capes — has been named president at ASC, though Melanson remains in the top spot as the CEO and chairman of the parent company.
Other management moves are not expected as a result of the merger, Melanson said.
“For the most part, all of the management team [at Atlantic Capes] came along and, we’re a month into it, but it seems to be going well. So yeah, everybody, mostly all of the employees that were working at Atlanta Cape, for the most part, have joined us,” he said.
Holding the highest post at a $500m seafood firm is impressive for Melanson, a New England son who began working in the seafood industry as a fish cutter when he was just 18 — 50 years ago — and co- founded Northern Wind in 1987 along with Michael Fernandes.
The Cohen family will retain its large fishing fleet of 17 vessels, which handle scallops among other species, as part of the deal, Melanson said. But the vessels will maintain a “tether agreement” that commits their scallop catch only to ASC companies.
ASC gained control of the Atlantic Capes Fisheries name for use on products for at least 18 months, Melanson said. However, the company will likely migrate all Atlantic Capes products to be sold under NorthernWind’s four main brands: Five Star Premium Scallops; Captain’s Call for Scallops; Mariner’s Choice Scallops; and Sea Spray Scallops.
However, Melanson said Northern Wind would add a new brand if itmade sense.
Why the deal took so long
Undercurrent began reporting on talks between ASC and Atlantic Capes as long ago as 2021. It emerged Acon’s ASC was the only remaining bidder for the company in January 2023 before a letter of intent was signed in April of the same year.
Then, during the 2024 Seafood Expo North America in March, sources said talks were still on, and a deal was close. At the time, one executive said an agreement could be reached before the start of the new scallop season in April 2024. This prediction proved to be optimistic as the
deal only closed a few weeks ago.
What took so long?
“It was just a complicated deal, and the reason why it was mostly complicated is because we didn’t buy the whole thing,” Melanson answered. “We didn’t buy all the boats. We just bought the IQF custom packing and the marketing division. So we have to separate a bunch of stuff, and certainly, when you get two people in a room, and somebody thinks it’s worth $5 and you only want to pay a dollar for that particular piece of it, it’s complicated. It just really is.”
He added: The [transition service agreements] and stuff were 40 pages
long for crying out loud.”
But the conditions in the scallop market were ripe for consolidation, Melanson said. As reported by Undercurrent, the New England Fishery Management Council voted, 15-1, on Dec. 5 to recommend a new set of Atlantic scallop harvesting rules that would result in projected landings of 19.75m lbs worth $348.25m during the 2025-26 season, which begins on April 1, 2025.
That would represent a 25.6% reduction from the 24.2m lbs in projected landings for the limited access fleet during the 2024-25 season. However, because the catch this season looks more likely to wind up far less than that projection, next year’s harvest might not compare quite as badly.
“Obviously, we’re going to get a little bit of a haircut in the 2025 quota,” Melanson commented. “You see imported scallops getting more expensive. The price of Japanese scallops went from $9.00 a pound to $15.00/lb. You see now domestic go from $14.00, $15.00/lb to $22.00,” he said.
“Anybody who understands our business knows that you need to buy 80% to 90% of all of your needs in the first month of the season, which is only five, six months. That’s it. And if you don’t cover that then, and you’re trying to buy scallops like they’re doing now or paying these prices, then you’re not in the scallop business.”
Decision pending on future acquisitions
Might ASC soon make other acquisitions? Answer: Melanson said there’s nothing currently in the pipeline but he wouldn’t rule it out.
“We’re always looking for deals,” he said. “When you are with a private equity, that’s what they do.”
Melanson spoke generally about the kinds of acquisitions Acon might make in the future, saying the company wants “to get as close to the resource as possible and get to the end user deep, deep into the market on the retailer side.”
Melanson was careful to note that ASC sells other products, too, including squid, tuna, clams, crawfish, mahi-mahi, snow crab, and alligator meat. The two key species, however, are scallops and lobster, he said.
SOURCE: Undercurrent News.
