SEAFOODNEWS.COM — December 12, 2014 — Thai Union Frozen Products and Mitsubishi Corporation are now seen as the frontrunners in the race to acquire Bumble Bee Foods, the largest shelf stable seafood firm in the US, write Tom Seaman of Undercurrent News.
The Thai tuna and shrimp processing giant, the management of which have just been on a non-deal roadshow in the US, is still a strong player in the process and has been seen by many as a natural buyer from the start, sources told Undercurrent News.
Japanese trading conglomerate Mitsubishi, which is looking to acquisitively boost its seafood business and already owns European canned tuna brand Princes as well as 7.58% in Thai Union, is also still being seen as a possible buyer.
First round bids for San Diego, California-based Bumble Bee were reportedly made in October to owner Lion Capital by Thai Union, Mitsubishi and Post Holdings, a US food processing group, after which a due diligence process started.
Final bids are now thought to be pending, with Thai Union and Mitsubishi still involved.
Lion Capital, which acquired Bumble Bee in November 2010 in a $980 million leveraged buyout, is reportedly looking for as much as $1.5 billion.
“Sources inside Bumble Bee feel there will be a transaction signed by Christmas, to communicate to the market, ” said a tuna sector executive, not wishing to be named.
As for Mitsubishi having 7.58% in Thai Union and a seat on the Thai firm’s board, sources feel it won’t hamper a deal.
Mitsubishi was an early investor in Thai Union and the relationship is solid, said one tuna sector veteran. “One can only assume that there is high level, pragmatic and polite discussions about this process, ” he told Undercurrent.
Thai Union and Mitsubishi both suspect the other is willing to pay more, he said.
It is not clear if Post, a major player in breakfast cereal production in the US, is still involved in the process.
Sources feel it is unlikely Post is willing to compete with Thai Union and Mitsubishi. Post did not return request for comment.
Chris Lischewski, CEO of Bumble Bee; Thai Union; Mitsubishi; and Lion all declined to comment.
Several tuna sources have said Thai Union is the “frontrunner” in the process, but Mitsubishi is also still in the mix. “These are the last men standing, ” said one tuna sector source.
“There is a lot of activity in Tokyo, ” said another source, close to the Japanese trading company, which has already bought salmon farmer Cermaq this year and merged its Princes tuna operations in Mauritius with the country’s second largest tuna processor, Thon des Mascareignes (TDM).
Thai Union, which is targeting $4 billion in turnover for 2015 and $8bn by 2020, has also been acquisitive this year, snapping up Norway-based pelagic canner King Oscar and Meralliance, a salmon processor with plants in France, the UK and Poland.
The company was seen as a frontrunner in the Bumble Bee process when the story broke in June, along with Bolton Group. Bolton, which owns a minority stake in tuna catching, trading and processing group Tri Marine International, also expanding into canned tuna in the US, has since ruled itself out of the process.
Then, several US-based companies were linked to the process, such as Post and Hormel Foods.
In 2013, Hormel moved outside its core meat business when it acquired Skippy peanut butter from Unilever for $700m and Post bought egg producer Michael Foods for $2.45bn this June.
“In the summer, there was a cooling down, but Thai Union seem to have made a comeback, ” said a tuna sector source.
“As they are now seen as the frontrunner, others are looking at the process with resignation. The US authorities encouraged US companies to take a look, as none of the big tuna brands are US-owned, ” he said.
Bumble Bee’s current private equity owner Lion is London-based; South Korea’s Dongwon Industries owns the number one brand Starkist; and Thai Union already owning Chicken of the Sea International, the number three brand. “But, now it seems Thai Union is on top of the situation, ” he told Undercurrent.
Bumble Bee Wild Selections Wild Selections are a high-end product Bumble Bee has launched under Lion Capital’s ownership.
As Thai Union owns Chicken of the Sea, the deal would more than likely have to get approval from the US Department of Justice to go through.
There has been some talk from tuna sources that Thai Union has some sort of pre-approval from the DoJ. A spokeswoman told Undercurrent this is not the case, however.
“We do not ever pre-approve deals, ever, ” she said.
Several tuna sector sources have said there should not be a big anti-trust issue with Thai Union buying Bumble Bee, which is the largest player in albacore.
Starkist continues to be the market leader in overall tuna, with Bumble Bee the top in overall shelf-stable seafood and albacore.
Chicken of the Sea is a smaller player in albacore, with Dongwon-backed Starkist the second biggest, sources said.
A potential Thai Union acquisition of Bumble Bee would need some compromises on which brand is used for what, sources said. “Bumble Bee could be the albacore brand and Chicken [of the Sea] could be used for light meat, for example, ” one source told Undercurrent.
US roadshow
Thai Union’s management, according to a presentation from UBS dated Dec. 5, were recently at the bank’s UBS GEM conference in New York, followed by a non-deal roadshow in the US.
The “meetings were packed with institutional investors, including current shareholders”, states the report.
Thai Union — 35% owned by the Chansiri family and headed up by president and CEO Thiraphong Chansiri, the son of co-founder Kraisorn Chansiri – restated its sales target of $8bn by 2020.
Superfresh Bumble Bee Bumble Bee Superfresh is a frozen brand the shelf stable specialist has launched.
The company also reiterated the sales target of $4bn this year, states UBS in the report, which is titled “Transition to global enterprise”.
Organic growth should contribute 40% of the $4bn increase, with the balance coming from acquisitions, ” writes UBS. That means $1.6bn is set to come from acquisitions, with Bumble Bee representing around $1bn of that, if Thai Union is indeed the winning bidder.
UBS sees a big upside in Thai Union buying Bumble Bee.
If Thai Union acquires Bumble Bee at enterprise value/earnings before interest, taxes, depreciation and amortization (ev/ebitda) of 10x, “we think it would add THB 8.00/share, or 10%, to our valuation. If Bumble Bee could deliver ROCE [return on capital employed] of 15% instead of 12% (our base-case assumption), it would create an additional THB 25/share to our valuation, reaching THB 123.00/share”, UBS wrote. Bumble Bee has annual ebitda of around $130m.
UBS has Thai Union rated as buy, with a target share price of THB 98, compared to THB 92.25 on Wednesday, a 12-month return of 45.87%.
“We are confident in TUF [Thai Union] management and the way it is transitioning the company to a truly global enterprise. The focus on branded business, innovative new products (higher margins), accretive acquisitions and human resources (hiring quality management, food scientists, etc. and linking their compensation to the achievement of specific return metrics) bode well for TUF shareholders, in our view. In the near term, earnings recovery and acquisitions will drive share price performance, ” writes UBS.
Trading giant acquisitive in seafood
Thai Union may be a global giant in the making, but Mitsubishi is already there.
The Tokyo-based conglomerate employs over 60,000 people in seven business segments, including finance, banking, energy, machinery, chemicals and food. Turnover in its latest financial year was $64.4bn.
Its food arm, under its Living Essentials Group, owns UK and continental European tuna brand Princes. As well as pulling off a massive deal to acquire Norway-based salmon farming group Cermaq, Mitsubishi showed its will to expand its tuna business with the deal for TDM.
Mitsubishi also owns 7.58% in Thai Union, the largest shareholder after the Chansiri family. Sources were not sure how this might impact both companies looking to buy Bumble Bee.
The Japanese trader was a big player in skipjack tuna trading in the past, but now is known more for its big position in the bluefin tuna business. Itochu, one of the other large Japanese tuna trading houses, has emerged as the major Japanese skipjack trader and is one of the “big three”, along with Tri Marine International and FCF Fishery.
Mitsubishi is “looking to get back into skipjack in a big way, ” said one source, however.
In November, it emerged Mitsubishi-owned Princes is merging is tuna operations in Mauritius with TDM.
The new entity will trade as Princes Tuna (Mauritius) and will be majority owned by Princes. It will operate two processing sites and generate sales of around $400m a year, said Princes. Contracts have been exchanged and the merger is expected to complete within the next few months.
TDM’s existing owners, including Ireland Blyth Limited (IBL) and the Mauritian State Investment Corporation, will have a stake in the new entity. TDM’s tuna processing site in Mauritius produces loins for export to canneries and pouches for foodservice customers.
According to IBL’s first-half year report, TDM processes around 80 metric tons of fish daily in a value-added pouch format, with the balance sold as loins to the leading EU and US canners.
Two brands needed
Mitsubishi buying Bumble Bee would mean a status quo of three brands in the sector, which Lischewski, the president and CEO of Bumble Bee, has spoken out against.
In an interview at the start of 2013, he told Undercurrent that the dynamics of the US industry, with its three large brands all aggressively competing for market share, is a problem.
“Is the US a three-brand market? In the perfect world, you would have two brands and private label, ” he said, at the time.
However, this [situation] is going to continue to make it a very tough trading environment, ” said Lischewski. “There are three very strong brands in the market that continue to fight for market share. ”
This story originally appeared on SeafoodNews.com, a subscription site. It has been reprinted with permission.