Sanford looking at merger option with Sealord

11.45am

Sanford Ltd is considering the possibility of merging with Sealord Group and Pacific Marine Farms Ltd.

Publicly-listed Sanford and Maori-controlled Sealord are the two biggest New Zealand owned fishing companies.

"In response to industry rumours and in advance of possible market speculation, Sanford Limited advises that it has been engaged in discussions and talks on possible and positive industry rationalisation," Sanford said today in a statement to the Stock Exchange under its continuous disclosure regime.

"One of the options being explored could lead to a proposal for a merging of Sealord Group Ltd and Pacific Marine Farms Ltd with the Sanford Limited listed company structure in the future, with Sanford shares being issued in exchange for ownership of the businesses based on relative valuations of the various enterprises.

"While these discussions and investigations have commenced nothing has yet advanced to the stage where any firm or formal proposals have gone to the boards of directors of any companies," the statement said.

Sanford, which has a market capitalisation of just under $500 million, said the talks were in preliminary stages only. Its shares closed yesterday at $5.06 having traded between $4.65 and $5.85 in the last 12 months.

It said the impact of the high New Zealand dollar, lower than expected catches of hoki, the difficult market environment for greenshell mussels and high fuel prices "were all issues that had been the subject of various discussions on possible industry cooperation and have been highlighted in various recent media articles".

"There is nothing which can be announced at this stage, beyond the fact that we are talking with each other, while looking at various possible concepts for the future benefit of the industry generally and of both companies and their respective shareholders.

"Should our talks lead on to any actual proposals, we will obviously keep the market and our respective shareholders fully informed as and when it is possible to do so," the statement said.

Any merger proposals would require extensive shareholder, regulatory and other approvals.

Sealord is 50 per cent owned by the Waitangi Fisheries Commission and has earnings of about $600 million annually. It is one of the bigger players in the $200 million a year mussel industry.

The other half is owned by Japanese seafood company Nippon Suisan Kaisha (Nissui).

The Government approved the sale of half of Sealord to Nissui in 2001 on the promise that the deal would create 700 jobs over five years, a promise that looks unlikely to be fulfilled.

Sealord largely blames the surprise Government moratorium on aquaculture developments imposed in November 2001, and now partially reversed, for being behind on its target.

Brierley Investments Ltd, now Singapore based and renamed BIL International Ltd, controversially sold half of the country's biggest fishing company and largest fish quota holder for $208 million.

The deal overcame those concerns by transferring Sealord's quota -- 23 per cent of the total quota available in New Zealand -- to the commission and by promising new investment and jobs.

Sealord leases the quota and the commission and Nissui have 50-50 ownership of Sealord's restructured operating company.

The chairman of Te Ohu Kai Moana (the Treaty of Waitangi Fisheries Commission), Shane Jones, confirmed the commission has been in discussions with Sanford.

Mr Jones said one of the options being explored was a possible merger of Sealord, Pacific Marine Farms and Sanford through the issue of shares based on relative valuations.

"We are positive about industry rationalisation opportunities. We have been actively scoping our options for some time and will continue to do so into the future to get the best returns for our Maori shareholders," Mr Jones said.

"There is nothing to announce at this stage beyond the fact that we are talking with each other, while looking at various options for the future benefit of the commission's companies and our shareholders," he said.

Pacific Marine Farms is fully owned by Te Ohu Kai Moana.

About 93 per cent of Sealord's product is exported to currency sensitive foreign markets.

In November 2002, former Goodman Fielder and Carter Holt Harvey executive Doug McKay took over as chief executive of Nelson-based Sealord with no experience in the fishing industry.

Mr McKay stepped into the job after a proposal to allocate about $700 million of fisheries resources to Maori had been announced.

Under the proposal still to be finalised, Sealord would be under the umbrella of what will become New Zealand's biggest fisheries firm -- Aotearoa Fisheries Ltd.

- NZPA