Pursuit of Bumble Bee swatted
Antitrust review ends Thai Union buyout bid
SET-listed Thai Union Group Plc (TU) has given up its ambitious US$1.51-billion planned acquisition of California-based Bumble Bee Seafood LLC.
The move stems from a complicated antitrust review that made the purchase likely to be rejected.
President and chief executive Thiraphong Chansiri said his company reached an agreement with Lion Capital, a pan-Atlantic private equity firm that owns Bumble Bee, to terminate the acquisition mutually, effective immediately.
“We put a lot of effort into getting this deal approved but recognise clearance is now unlikely due to a higher level of complexity in the process,” he said.
Both firms concluded clearance was unlikely in the time stipulated in the share purchase agreement.
Mr Thiraphong said over the past 12 months, TU and Lion Capital had vigorously advocated the merits of the deal to the US Justice Department.
“We’ve decided to focus our energy on our existing business instead,” Mr Thiraphong said.
“TU remains committed to the North American seafood market.”
Earlier he said the company would consider other tuna and seafood companies globally.
“A deal could happen at any time if it complemented our business,” Mr Thiraphong said.
TU last Dec 19 announced it had agreed to acquire Bumble Bee Seafoods to expand its presence in North America.
The deal, which represented the most ambitious acquisition in TU’s history, would have helped to create additional annual sales of $1 billion, equal to Bumble Bee’s annual sales of canned, pouched and frozen seafood in the US and Canada.
The deal was expected to be sealed by mid-2015 but suspended due to an antitrust review by the Justice Department.
Chicken of the Sea has a 15-18% market share in the US for shelf-stable tuna, while Bumble Bee controls 28-30%.
The Justice Department investigation of whole packaged seafood including shelfstable tuna caused the suspension of TU’s plan to raise 13.2 billion baht to finance the buyout through its preferential public offering (PPO).
Mr Thiraphong earlier said the PPO would be terminated if an agreement was not reached.
A statement from the Justice Department after it acknowledged the deal termination noted concerns about combining the second- and third-largest sellers of shelf-stable tuna in the US in a market long dominated by three major brands.
It said these were the largest and second-largest domestic sellers of other shelf-stable seafood products.
“Consumers are better off without this deal,” said Bill Baer, assistant attorney-general in the department’s antitrust division.
“Our investigation convinced us — and the parties knew or should have known from the get go — that the market is not functioning competitively today, and further consolidation would only make things worse.”
Ploenjai Jirajarus, an analyst at Capital Nomura Securities, viewed the move as positive news for TU shares in the short term.
TU is no longer required to raise capital to finance the buyout, which would have boosted financial costs in the long term, she said.
The securities firm said the market consensus target for TU’s share price was 22 baht, up from 17.50 baht earlier with the deal killed.
Rittirong Boonmechote, president of TU’s global shrimp business, said the company had not yet assessed whether the cancellation would affect profits.
“The company’s chief executive and board will meet next week, and such information should be released to the media shortly,” he said.
TU previously set a target for global revenue of $8 billion by 2020 even if it failed to acquire Bumble Bee.
Prior to the Bumble Bee deal, TU acquired three major canned and seafood companies in Europe — MerAlliance, King Oscar and Orion Seafood.
Those acquisitions helped to improve its sales on the continent substantially, leading to a strong first-half net profit.
The company posted a first-half net profit of 2.92 billion baht, up by 18.1% year-on-year, with a net profit margin of 4.9%, up from 4.2%.
TU shares closed yesterday on the SET at 18.50 baht, down 50 satang, in trade worth 218 million baht.