Cape Town - Oceana Group [JSE:OCE] has announced that it would be acquiring 100% of the share capital of US-based Daybrook Fisheries for $382.3m.
Oceana CEO, Francois Kuttel, said that the transaction would provide the company with a significant opportunity to expand its international operations, to increase diversification of its targeted fish species, product profile, operational geography and currency exposure.
“We have consistently stated our intention to expand internationally. We’ve evaluated opportunities in South Africa, in the rest of Africa and globally. We believe that Daybrook offers us the profile and scale to deliver required risk adjusted returns.
“This really is an opportunity for us to acquire access to a sustainable and well managed fishing resource. Fishmeal and fish oil are high-protein ingredients in feed for aquaculture one of the fastest growing food production segments in the world.
“Global supply of fishmeal and fish oil is constrained and when coupled with increased demand for fish as an important source of animal protein for human consumption, expectations are that fishmeal and fish oil prices will continue to show steady growth.
“We’re also delighted that this will lead to a positive impact on skills and knowledge being transferred across geographies. Daybrook’s expertise in fishing and processing a species that is new to Oceana will allow for considerable skills transfer to our company," he said.
Daybrook is a vertically integrated company, which operates out of Empire, Louisiana. It catches and processes Gulf Menhaden fish into fishmeal, a high protein feed ingredient, and fish oil, which is sold for aquaculture feeds and for further refining into dietary supplements.
Daybrook’s revenue is generated through sales of fishmeal and fish oil to leading American and international companies manufacturing animal and aquamarine nutritional products and selected distributors servicing this sector.
The processing plant assets and sales and administrative functions are owned by Daybrook, with the fishing vessels and spotter plane operations are owned by a wholly owned subsidiary, Westbank.
Westbank holds the fishing licenses, which are not subject to an individual quota allocation system. These licenses are granted on a perpetual basis provided that at least 75% ownership of the vessels lies with US citizens.
In order to maintain the fishing licenses, the newly created Oceana US Holdings will hold 100% ownership in Daybrook directly and an effective 25% ownership in Westbank.
The three primary shareholders in the current business will retain 75% shareholding in Westbank, thereby ensuring both operational continuity and compliance with US citizenship requirements.
‘Strong balance sheet’
Oceana CFO Imraan Soomra said that the deal with Daybrook “supports our strategy of increasing returns by anticipating market trends. Shareholders will benefit from enhanced group profitability and cash flow generation and earnings stability through increased diversification.
“Other benefits include synergies, expansion opportunities for Daybrook given the sustainability of the fishing resource and a planned increase in plant processing capacity.”
Oceana has placed an overall valuation of $414m on the combined Daybrook business with 2014 revenue and normalised EBITDA figures of $114m and $48m respectively.
The purchase consideration of $382.3m takes into account the 100% acquisition of the processing plant and administration assets and a 25% share in the vessel business.
Ocean’s intention is to fund the acquisition with a combination of debt raised in the US, which will be secured against Daybrook’s cash flows, Oceana’s cash and fresh equity raised through a proposed rights offer in South Africa.
Oceana has secured underwritten funding commitments from Bank of Montreal for the US dollar funding portion and from Standard Bank for the South African Rand portion of funding.
“We have stated for some time now that our strong balance sheet affords us the opportunity to pursue an acquisition transaction of scale. Our approach to funding this transaction remains conservative though and we remain mindful of our shareholders desire to receive continuing dividend flow.”