HALIFAX – Canada’s largest shellfish producer says a proposed takeover of Clearwater Seafoods Income Fund (TSX:CLR.UN) won’t succeed in its current form.
Clearwater Fine Foods Inc. president John Risley made the comments Thursday in response to a recent unsolicited bid by rival Cooke Aquaculture Inc. to buy all units it doesn’t already own for $3.50 each – valuing Clearwater at about $97.1 million.
“The big issue here is that if (Cooke) wants control, the trustees are going to ask: ‘Is that possible?'” Risley said after the company’s annual unitholders meeting in Halifax.
“As unitholders at Clearwater Fine Foods, we think that’s not possible. But we can’t speak for all the (unitholders).”
Earlier this week, the fund issued a statement saying Clearwater Fine Foods Inc. (CFFI) had told the trustees it believes there are other unitholders that share Risley’s dim view of the offer. The statement said those unitholders, together with CFFI, hold over 50 per cent of the fund’s fully diluted units.
Risley said the fund’s trustees have hired BMO Financial Group to provide advice prior to formal discussions with Cooke, and he expects to hear back within the next few weeks.
Clearwater Fine Foods Inc. currently holds 48.2 per cent of the fund’s voting units, while Cooke holds 10.9 per cent. The privately-owned company, led by CEO Glenn Cooke, primarily farms salmon.
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Cooke announced its hostile bid Aug 12. and Halifax-based Clearwater announced a unitholder rights plan Monday to fend off the takeover bid from the New Brunswick company.
The poison pill plan allows unitholders to acquire units at an 80 per cent discount if Risley’s company increases its stake or if someone else acquires ownership of at least 20 per cent of the fund’s voting units.
Cooke has said it welcomes the plan because it prevents insiders from buying more shares to block a potential bid.
Risley said Cooke’s offer is too low, considering Clearwater is in the midst of a recovery.
“We’re optimistic about the company’s future prospects,” he said.
“That would lead us to believe there’s more value there. We got a new management team, and a CEO who’s been in place for slightly over a year.”
Chief executive Ian Smith was appointed in May 2010.
The fund said Clearwater Seafoods LP, recorded a net loss of $332,000 in the second quarter, down from a loss of $5 million in the same period a year earlier.
Sales rose to $78.8 million from $70.8 million on improved prices and a shift to species that bring in higher margins.
The operating division has cut costs, reorganized its fishing fleet and won certification for its sustainable fishing practices, which allows it to charge more for all of the species it harvests, Risley said.
As well, a hedging program has helped the company cope with the rising value of the Canadian dollar.
Still, Clearwater hasn’t issued payments to unitholders since 2008.
When Risley and co-founder Colin MacDonald turned the firm into an income trust in 2002, investors paid $10 per unit. Those units were trading at $2.79 Thursday.
The pair had planned to wind up the income trust years ago, but the plan fell apart when the recession took hold in 2008.
On Thursday, unitholders approved a plan to transform the fund into a publicly traded corporation by the end of the year. The new company will be called Clearwater Seafoods Inc.
Clearwater has 1,600 employees, about 20 vessels, seven plants and offices in Toronto, Europe, China, Japan, Europe and the United States. The company is best know for its lobster products, but it also harvests scallops, clams, shrimp, crab and other ocean fish.
Cooke has about 2,500 employees at salmon operations in New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland, Maine, Chile and Spain, as well as sales people in the United States and Canada.
Cooke Aquaculture processes and sells more than 115 million pounds of Atlantic salmon and 35 million pounds of trout each year, generating more than $500 million in sales.
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