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Who will take the can?

Who will take the can?

WHILE the market awaits approval of fishing conglomerate Oceana’s takeover of the fishing segment of FoodCorp, lines are already being cast for who the buyer of the Glenryck pilchard canning business will be. 

In May, Oceana clinched heads of agreement with Foodcorp for the R445m acquisition of the Foodcorp Fishing Division. The Foodcorp Fishing Division trawls three sectors of the local fishing sector its largest business being in the small pelagic sector (pilchard and anchovy) as well as deep sea hake and lobster (which was excluded from the Oceana transaction.)

Foodcorp’s pelagic haul would be a key catch for Oceana’s highly profitable pelagic business. But because Oceana already has a major fish canning presence - via its brand leading Lucky Star canned pilchards brand – the company would have to sell off the Glenryck pilchard canning operation to appease competition authorities. The Foodcorp deal is by no means landed. Key terms to be fulfilled include the transfer of the fishing rights acquired being approved by the Department of Agriculture, Forestry and Fisheries and approval by the Competition Authorities.

Oceana has, though, been upfront about its intention to enter into an agreement to dispose of the Glenryck Trademark when the FoodCorp deal becomes unconditional. Oceana has also pointed out that should it not be successful in finding a buyer for the Glenryck Trademark then Foodcorp will have the option to retain the brand (and reduce the overall purchase price.) Presuming all the conditions precedents are fulfilled, CBN finds it hard to imagine that Oceana will wait very long for prospective buyers to nibble at the Glenryck trademark.

There has been talk that Oceana’s empowerment partner, Brimstone, could be interested in steering its own fishing subsidiary, Sea Harvest, towards Glenryck. But Sea Harvest is a frozen hake specialist, and shifting into the pelagic line might not hold too many operational synergies or marketing advantages.

The smart money is on Premier Fishing, predominantly a west coast and south coast lobster specialist – but with a growing presence in the pelagic sector. Premier Fishing’s Pelagic operation is located in Saldanha Bay and has a fleet of five trawl boats and one joint venture. Premier Fishing has a quota of 19,000 tons for pilchards, which is caught for canning purposes, as well as a quota of 6,500 tons for anchovy, which is caught for fishmeal processing purposes. Premier Fishing already has various processing plants and factories around the coast, from Port Nolloth to Saldanha, Hout Bay, Cape Town, Gansbaai and Humansdorp.

But more significant – in terms of a possible tilt at Glenryck - could be the Premier Fishing’s recently signalled intention to reopen its Saldanha Bay plant, where an environmental impact analysis (EIA) process is already underway. Premier Fishing’s directors have argued that the revamped Saldanha Bay plant will strategically position the pelagic division for further growth in the medium to long term. Premier Fishing already markets its pilchard catch through the Asta brand. But holding another well-known brand in Glenryck might offer the company a huge marketing advantage in capturing market share.

In other fishing news, frozen hake specialist Irvin & Johnson (I&J) appears to have bounced back in the second half of the financial year to end June. A trading update from parent company, AVI, showed I&J likely to post revenue of close to R1,6bn – which is up on last year’s R1,5bn. This is quite a turnaround from the interim period where I&J looked flat after posting lower half-year revenues of R720m (compared with R749m the previous year.)

AVI directors noted I&J had a much improved second semester due to improved fishing performance and the weaker rand, which largely offset the year-on-year decline in first semester profit. One also suspects the new Marel fish processing line at I&J - commissioned in January 2013 – was a factor in the improved second 
half showing.

Another noteworthy development is the effort by Brimstone – the controlling shareholder in Sea Harvest – in facilitating the funding of 50 new franchisees that will open The Fish & Chips Co. outlets. The Fish & Chips Co. is a franchise brand owned by Taste, a franchise specialist in which Brimstone has a strategic stake. 

Brimstone’s initiative aims to provide competitive funding for potential franchisees who, under normal circumstances, would not have access to a bank loan or the required security to acquire such a franchise.

The funding arrangement – undertaken by Nedbank - has been made possible through a combination of Brimstone providing a guarantee for certain obligations of the franchisee and Taste providing its franchise systems and continuous oversight. Brimstone’s determination to bring new franchisees into the mix is understandable since it’s likely Sea Harvest will supply a goodly portion of the hake needs for the fast growing The Fish & Chip Co.


 

By Jenni McCann

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