JSE-listed Oceana expects to conclude the acquisition of US-based Daybrook Fisheries for about R4.588-billion by late July, subject to the approval of the requisite majority of Oceana’s shareholders.

However, a put premium of R180-million may be paid to the remaining shareholders, which would result in R4.768-billion ultimately being paid.

Ocean advised shareholders in a statement on Tuesday that the purchase consideration was to be satisfied through up to R2.4-billion cash on hand, an equity bridge facility of R1.2-billion and US debt of R1.7-billion.

Lucky Star, a wholly-owned subsidiary of Oceana, would raise a R2.7-billion term facility to refinance an existing short-term facility drawn down to fund the group’s working capital commitments and to the extent necessary fund the shortfall to meet the purchase consideration.

In a statement to shareholders on Tuesday, Oceana noted that its strategy included the expansion of its international operations to further diversify its targeted fish species, operational geography, product profile and currency exposure.

“As the largest fishing group in South Africa, Oceana has evaluated opportunities in South Africa, the rest of Africa and globally to meaningfully increase its scale and diversity.

“Oceana believes that this opportunity has the profile and scale to deliver the risk adjusted returns shareholders require,” the company advised.

Daybrook Fisheries, a vertically-integrated fishing company, in Empire, Louisiana, south of New Orleans, near the mouth of the Mississippi river, currently harvested Gulf Menhaden and processed the fish into fishmeal and fish oil.

Oceana highlighted that demand for fishmeal and fish oil was increasing owing to rising global protein requirements, growing demand from aquaculture production and as inputs for pet food and pork production.

The company expected this trend to continue in the longer term.

Based on Oceana and World Bank analysis, the increase in fishmeal demand was primarily owing to the aquaculture industry, which was one of the fastest growing food production segments in the world.

Oceana saw the proposed acquisition as an opportunity for it to undertake a “truly transformative transaction and acquire access to a sustainable and well-managed fishing resource”.

The proposed acquisition was also expected to create a significantly larger group with multicountry exposure, while also providing the company with a platform to explore further initiatives globally.

Oceana had identified cost savings that could be extracted from Daybrook Fisheries through its incorporation into the broader Oceana group.

These savings were expected to deliver incremental earnings before interest and taxes of at least R32-million a year within two years of the proposed acquisition.

MORE ABOUT DAYBROOK
Daybrook Fisheries was in close proximity to the abundant and well-managed Gulf Menhaden resource and was currently the second-largest processor of the fish in the US.

Gulf Menhaden, small oily fish, are migratory plankton surface-feeders that swim in large schools during the fishing season, which extends from mid-April to November. Daybrook Fisheries was at present responsible for 35% to 40% of the yearly Gulf Menhaden catch.

Daybrook Fisheries sold 76 862 t of fishmeal and fish oil equivalent to realise revenue of R 1.308-billion and normalised revenue of R1.203-billion in 2014.

Normalised revenue had been calculated by adjusting for the revenue impact of about R105-million, resulting from a closing inventory normalisation adjustment.

Daybrook Fisheries’ December 31, 2014, year-end reported earnings before interest, taxes, amortisation and depreciation (Ebitda) was R454-million and normalised Ebitda was R506-million. Normalised Ebitda had been calculated by adding back non-recurring historical expenditure of Daybrook Fisheries, being an aggregate R100-million that would not occur under the ownership of Oceana, less a closing inventory normalisation adjustment of about R47-million.

Sales were made to leading domestic and international companies manufacturing animal and aquamarine nutritional products as well as selected distributors servicing these markets. Daybrook Fisheries’ proximity to the Port of New Orleans, as well as other Gulf of Mexico ports, enabled the competitive export of its products to China and other Asian countries, Europe and Latin America.

Daybrook Fisheries, through its subsidiary   Westbank   Corporation, currently owned and operated eleven refrigerated tender vessels and ten single Cessna aircraft used to assist vessel captains locate schools of Menhaden. Each vessel carried two 12-m-long fishing boats that caught Gulf Menhaden through the purse seining method.

In addition to the operation in Empire, the company also had corporate and executive offices in Morristown, New Jersey and New Orleans, Louisiana, and storage facilities in Memphis, Tennessee and Avondale, Louisiana.

Oceana shareholders would receive by mid-June a circular setting out the full terms of the proposed acquisition, including the notice of the general meeting scheduled for mid- to late-July.