Weekend Economists Silent Night Christmas Eve 2014

[Demeter]

51. Tuna tie-up: Chicken of the Sea owner buys Bumble Bee for $1.5bn

http://www.theguardian.com/business/2014/dec/19/tuna-meger-chicken-of-sea-bumble-bee?CMP=ema_565

Thai Union, one of the world’s biggest seafood companies, owns Chicken of the Sea and announced it will buy Bumble Bee. Will antitrust authorities allow the tuna market to become so concentrated? Thai Union Frozen Products, owner of Chicken of the Sea, is acquiring Bumble Bee Seafoods, a major seller of canned tuna in the United States, for $1.5bn, sandwiching two of the biggest tuna packagers in the country. Thai Union Frozen Products is the world’s biggest producer of canned tuna and it’s looking to double revenue through overseas acquisitions.

The purchase, which is Thai Union’s largest ever, will give the company control of some of North America’s most well-known seafood lines – including two of the three biggest canned tuna brands in the United States – in its quest to reach revenue of $8bn by 2020. The deal marks the latest instance of consolidation in a global seafood industry that analysts say has been in flux over the past few years, as companies change the way they manage supplies and costs to better cater to shifting consumer demand.

The transaction is likely to be completed in the second half of next year, subject to approval from US antimonopoly authorities, said Thai Union, whose clients include Wal-Mart Stores and Costco Wholesale. Thai Union president and chief executive Thiraphong Chansiri, whose company has operated in the US for over 17 years, said he expected a “positive response” from the authorities. But Thai Union may have to sell US assets to win antitrust approval, said a person familiar with the transaction, who asked not to be identified because of sensitivity of the deal.

Thai Union’s Chicken of the Sea is the third-biggest tuna brand in the US behind Bumble Bee. The top brand, Starkist, is owned by South Korea’s Dongwon Industries.

Cash call

Bumble Bee is the largest canned tuna and sardine producer in North America, with brands including Brunswick and Sweet Sue. It is owned by pan-Atlantic private equity firm Lion Capital, which bought the seafood maker from another private equity firm for $980m in 2010. It has annual sales of about $1bn. Its purchase should boost Thai Union’s sales next year to $5bn from $4bn, Thiraphong said. The transaction is valued at 8.6 times Bumble Bee’s 2014 estimated earnings, Bumble Bee said in a separate statement. The acquisition would be Thai Union’s third this year after the purchase of Norwegian canned fish producer King Oscar and French smoked salmon supplier MerAlliance.

For further expansion, analysts said Thai Union’s rising debt means the company would need to sell shares to raise capital. But the acquisition should boost Thai Union’s 15% to 17% gross profit margin, Thirapong said, as Bumble Bee’s profit margin is more than 20%. Thiraphong, 49, is the eldest son of Thai Union co-founder and chairman Kraison Chansiri, and took over as president when he was 30. Kraisorn was born in the Guangdong province of China and started the business 37 years ago with a tuna cannery in the Thai province of Samut Sakhon, southeast of Bangkok. Tuna now makes up 47% of sales, with shrimp 24% and the rest from sardines, salmon, pet food and other products. As well as Thailand and the US, Thai Union has been active in Europe since the 2010 purchase of MW Brand.

For its latest acquisition, Thai Union has hired UBS as adviser while Bumble Bee is being advised by Morgan Stanley and Rothschild. Thai Union is financing the purchase with the help of a one-year bridge loan from Bangkok Bank and Siam Commercial Bank, executives from the two banks said.


IN WHAT WAY IS ANYONE SERVED BY SUCH A MONOPOLY? I AM SERIOUSLY CONSIDERING GIVING UP TUNA. WE HAVE 3 PONDS HERE...PERHAPS AQUACULTURE?