Big fish plan $1b merger

By IRENE CHAPPLE

New Zealand's two biggest fishing companies, Sealord and Sanford, are discussing a merger which would create a listed giant worth more than $1 billion.

The proposed new company, which would have about 70 per cent of the industry's sales, would be one of the top 20 companies on the stock exchange.

Sealord and Sanford are understood to have been considering the merger for some months, although due diligence has not officially started.

On paper, the partnership looks unequal - Sealord's sales revenue of $500 million to $650 million is much more than Sanford's $367.7 million.

But Sanford has little debt and is seen as a tightly run, streamlined and cost-efficient operation.

Sealord, jointly owned by Japanese company Nissui and Te Ohu Kai Moana, which controls Maori fishing assets from Treaty of Waitangi settlements, has extensive international networks and has focused on marketing overseas.

Pacific Marine Farms, 100 per cent owned by Te Ohu Kai Moana, may also be part of the merger.

Relative valuations of the companies' assets - which will play a large part in merger negotiations - have not yet been done.

Both parties are understood to be keen for the merger to go ahead because of the difficulties facing the industry.

Yesterday the chief executives of both companies refused to comment beyond a statement given to the stock exchange.

Sanford said the company "has been in the preliminary stages of discussions which could have a major impact on forward plans".

Sealord's Doug McKay was in Los Angeles on his way to a fishing fair, and said he could not comment further.

But McKay's stance was made clear last month when he called for co-operation among the industry's big companies to help weather the foreign exchange "crisis".

His comments were made as the New Zealand dollar hit a seven-year high of more than 70USc.

Mckay said it was time for fishermen to stop competing and work for the good of the industry.

The industry has also been hit by lower than expected catches of hoki, a difficult market for shellfish, legislative troubles over the aquaculture industry and high fuel prices.

Shane Jones, chairman of Sealord and Te Ohu Kai Moana, said the time was ripe for rationalisation.

"The fishing industry is a challenging place to maintain profitability due to volatility of the dollar and the variability of fish catch.

"The industry needs to establish more efficient ways and more collaborative ways to have fish processed and these discussion represent a positive way forward."

The proposed company will split shareholdings between the public, Sanford's cornerstone shareholders, Te Ohu Kai Moana's new company Aotearoa Fisheries, and Nissui.

Other companies which will come under the Aotearoa Fisheries umbrella, such as Moana Pacific, could become part of the merged company.

Jones said the effect on Aotearoa Fisheries, now being established through legislation, was positive.

"We would capture economies of scale and the Maori presence that is in the industry would be further cemented."

It has not yet been established how the shareholding will be split, although Sealord's two shareholders are likely to take at least 25 per cent.

There are competition issues, but they are not believed to be major obstacles for a merger.

Any one entity can hold only 45 per cent of total quota, but records show a merged Sealord/Sanford would breach that in only a few species and the Fisheries Minister can grant exemptions.

A combined company would have almost $1 billion in sales - a huge percentage of the $1.4 billion made by the entire fishing industry last year - most of it in exports.

News of a possible merger was met with enthusiasm yesterday by Chris Horton, an ABN Amro analyst and former chairman of the Fishing Industry Board.

"Any industry that is coming under that kind of pressure should be able to rationalise," he said

Reaction from investors was muted. Sanford's shares closed 0.79 per cent up at $5.10.