Fising sector taking the bait

Last week Oceana confirmed earlier speculation (FM Fox November 18) that it would acquire Lusitania, a well-known Cape Town fishing company, from the Fernandes family.

There may be a perception that Oceana, controlled by consumer brands giant Tiger Brands (with Brimstone as a significant minority shareholder) and with annual revenue of R3,7bn, is already too dominant a player in the local fishing sector. Its sphere of influence is spread across most subsectors, including the high-volume pelagic fishing sector.

Most observers would probably have bet on empowerment contenders Brimstone Investment Corp and Sekunjalo Investments, via their respective controlling shareholdings in Sea Harvest and Premier Fishing, leading the consolidation charge.

Both companies may still have key roles to play, though efforts that concentrate ownership in the fishing sector might not find favour politically. Efficiency is critical if companies are to survive in a sector straining under increasing costs (especially fuel).

Brimstone deputy chairman Fred Robertson reckons consolidation or corporate action in the fishing sector needs to be viewed circumspectly. "There is tension between artisanal fishing communities and industrialised players. Leadership is needed from government and Marine Coastal Management. But there needs to be a realisation that fishing is not a political football, and that any regulation must be economically driven with a view to creating sustainable jobs."

Robertson says the recent joint venture between rival firms Oceana and Premier Fishing, which will reopen a fish meal factory in Saldanha, shows just how important fishing is to SA's food security.

Some market watchers have mooted the joint venture between Oceana and Sekunjalo-controlled Premier as a precursor to full-blown corporate action, most likely involving the (much) larger Oceana taking over Premier Fishing. Talk of a deal has surfaced regularly over the years, but Sekunjalo is unlikely to let go of Premier Fishing unless it's offered top dollar (think of a price north of R600m).

Meanwhile Oceana and Premier may extend their working arrangement from the fish meal plant to the lobster sector. Oceana, a west coast lobster specialist, will receive a quota for south coast lobster from the Lusitania deal. It might make sense for Oceana, at least initially, to use Premier Fishing's well established marketing channels for south coast lobster.

All this working together . who knows where it could lead? But Sekunjalo CEO Khalid Abdullah seems keen for Premier Fishing to paddle its own boat, recently reiterating long-held ambitions to gradually build up the fishing segment by taking on board smaller fishing enterprises either in equity partnerships or joint ventures.

This is probably not as easy as it sounds. It may be difficult for a corporate to win the trust of community fishing groups, even if there are considerable benefits for smaller players in terms of processing and marketing (perhaps even access to capital too).

While Abdullah is quietly confident that mutually beneficial deals with smaller fishing players can be arranged, it would not be too surprising if Premier Fishing angled for the remnants of the Lusitania empire, most notably the West Coast lobster segment.

Meanwhile Premier Fishing has the luxury of a fairly diverse product range (lobster, pelagic, squid and abalone) to keep it busy.

Sea Harvest, on the other hand, is a pure hake player.

Brimstone is a renowned deal-maker, but there seems to be some reluctance to broaden Sea Harvest's operating base. Perhaps there is a feeling that holding a controlling stake in Sea Harvest as well as a significant minority stake in Oceana is more than enough exposure to seafood.

Robertson indicates that diversification efforts may include excursions into the broader food sector.

What will be intriguing to gauge in the next few weeks is developments at blackowned consumer brands business Foodcorp, which recently put its fishing division, Marine Products, up for sale.

The identity of the bidder, said to be an empowerment entity, was not revealed by Foodcorp because conditions precedent had not yet been met.

It seems the initial sale proposal has fallen away anyway. But Foodcorp is keen to mobilise funds to reduce its debt, so it surely can't be long before new bidders emerge.

Once again Premier Fishing (which purportedly was an early interested party at Lusitania) may come into the reckoning, though parent company Sekunjalo may be wary of hauling aboard new debt at this delicate stage of its turnaround.

Oceana could easily afford to take up Marine Products, but whether such a deal would be welcomed by government (which basically prefers not to see black ownership of fishing companies diluted) is debatable.

The truth is that if Premier Fishing and Sea Harvest don't come knocking at Foodcorp's door, it won't be easy to find a black-controlled investment entity to take over Marine Products in a hurry.

All things being equal, pan-African conglomerate Lonrho Africa, which has recently dipped its toes into the local fishing sector, and Bidvest, which might want to extend the reach of its very successful Namibian fishing operations into SA waters, might even be keen.

Source: Financial Mail