South Africa-based whitefish giant Sea Harvest said it plans to take control of two subsidiaries from domestic investment group Terrasan.
The deal includes the acquisition of Terrasan's pelagic subsidiary West Point Fishing, and a 63 percent stake in Terrasan’s abalone subsidiary Aqunion.
The ZAR 965 million (€46 million/$50 million) deal will be settled in shares and cash.
West Point Fishing operates a fishing fleet that catches sardines and anchovies and produces fish oil and fishmeal. The company also produces canned fish largely for the South African market which is sold under the Saldanha brand. The company is based in St. Helena Bay in the Western Cape and employs more than 600 workers.
Aqunion produces and sells dried, canned and live abalone to customers in Asia. The company is based in Hermanus and Gansbaai in the Western Cape and employs 430 staff.
“We are confident that the acquisition will create value and diversification into wild caught pelagic species and their processed products, including fish oil, fishmeal and canned fish,” Sea Harvest Group CEO Felix Ratheb said.
“Furthermore, it will enable us to add value and scale to our own small sardine and anchovy pelagic quota where we currently have a small footprint...counter the cyclicality of the pelagic fishery relative to the hake fishery and add a mature, cash generative abalone business with a diversified customer base and markets to our existing abalone operations,” Ratheb added.
Terrasan and Sea Harvest believe that a combined South African abalone business will benefit from scale and synergies created through the consolidation, leaving it well positioned to exploit international opportunities and compete in its target markets, Terrasan Group CEO Danie du Toit said.
The initial purchase amount will be settled through ZAR 600 million (€28 million/$31 million) in Sea Harvest shares and the balance in cash, together with two further performance linked earnout amounts.
An Earnout or earn-out is a pricing structure in mergers and acquisitions where sellers must "earn" part of the purchase price based on the performance of the business following the acquisition.
The acquisition represents material progress in Sea Harvest’s goal of becoming a responsible and diversified food and fishing business, the company said.
The deal is subject to regulatory approvals and the approval of Sea Harvest and Terrasan shareholders.
Johannesburg-listed Sea Harvest was founded in 1964, and is a vertically integrated, majority black-owned fishing and food company. The group employs about 6,000 staff and has operations in South Africa and Australia.
Sea Harvest's primary fish species are hake, horse mackerel, prawns and abalone, and it owns and operates around 50 vessels, five fish processing facilities and two abalone farms.
Terrasan is a South African investment group holding investments in the pelagic fishing, aquaculture and property industries.
Last year, Sea Harvest acquired an extra 28 percent stake in abalone producer Viking Aquaculture for ZAR 210 million (€10.7 million/$11.3 million), bringing its total holding in the company to 82 percent.
Abalone is a high-value, high-margin aquaculture species which is sold in Far East markets in live, dried, canned and frozen formats.
