Fishing giant Oceana Group, the owner of the Lucky Star canned pilchards brand, will be charting a course into the new long-term fishing rights application process without its long-standing anchor shareholder.
Consumer brands company Tiger Brands confirmed on Thursday plans are in place to unbundle its 42% stake in Oceana by April 2019.
In an investment presentation, Tiger CEO Lawrence MacDougall said Oceana, although a perennially profitable business, is “not strategically right” for Tiger to take a majority stake. “Unbundling gives the best value back to investors.”
No details of the mechanics of the unbundling were provided. Tiger carries a market capitalisation of R51bn with Oceana’s market value at about R11bn.
Tiger’s unbundling decision comes just ahead of the start of the 2020 fishing rights application process, and effectively elevates empowerment company Brimstone Investment Corporation to Oceana’s largest single shareholder with a 17% stake. The unbundling will also make the Oceana Empowerment Trust, which holds a 10% stake, more prominent.
Market watchers are now pondering whether Tiger’s decision could prompt a similar decision from rival consumer brands group AVI, which is the controlling shareholder of fishing group I&J.
Empowerment companies Brimstone and African Empowerment Equity Investments, respectively, separately listed Sea Harvest and Premier Fishing & Brands in 2017 to take advantage of opportunities presented by the fishing rights application process.
Independent analyst Anthony Clark said the unbundling decision of Tiger Brands stake in fishing business Oceana is not surprising ahead of the long-term fishing rights application process and the need for fishing businesses to have a more comprehensive and dynamic management and ownership structures.
Initial market speculation is now focused on the role Brimstone will pay once Tiger relinquishes its majority stake.
Oceana only issued a brief statement around the unbundling proposal, noting that a sub-committee has been mandated to explore the opportunities presented by the development.
“Oceana has always operated as an independently listed company and we remain committed to our strategy and business plan,” it said.
Clark noted that Brimstone already holds a controlling stake in Sea Harvest and has recently pumped more capital into that business to fund acquisitions. “One wonders if Brimstone has appetite or funds — or will even be allowed — to increase its current stake in Oceana?”
Clark argued that Oceana was the dominant white fish and pelagic fishing company in SA, and consequently might be concerned that the 2020 fishing rights application processcould see it losing total allowable catch quotas to more empowered fishing counters and new community-based entrants as the government moved to impose stricter BEE rules on this primary industry.
Oceana, which also owns the sizeable Daybrook fish oil and fish meal operation in the US, has previously indicated a worst-case scenario for 2020 quota cuts for Oceana, would mean the key Lucky Star operation, which already buys in most of its fish for processing, would lose margin.
Estimates suggested that a 30% quota cut in key catches could shave only about 5% off Oceana’s earnings in the shorter term.
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