/NOT FOR DISTRIBUTION TO UNITED STATES OR FOR DISSEMINATION IN
THE UNITED STATES/
HALIFAX, Oct. 9, 2015 /CNW/ - (TSX: CLR):
- Strengthens Clearwater's
leading global market position in complementary premium wild
seafood with an immediate 20% expansion of supply (approx. 15
million lbs) of high quality shellfish including; scallops,
langoustine, whelk and crab
- Purchase price of £94.4 million plus approximately £4 million
in seasonal working capital debt agreed with existing owners, the
Beaton Family and Change Capital Partners
- Projected sales for year ended September
30, 2015 of approximately £52 million with £9.2 million of
adjusted EBITDA projected to grow by 25% to £11.5 million in 2016
from recent investment in complementary shellfish species
- Expected to be accretive in 2016 to adjusted earnings of CAD
$0.17 on a per share basis
- Attractive near term opportunities for future growth in
adjusted EBITDA from harvesting, processing, marketing, sales and
distribution; and
- Expected to close on or before October
30th, 2015.
Clearwater Seafoods ("Clearwater") announced that it has entered
into an agreement with the Beaton Family and Change Capital
Partners, the private equity fund, to acquire 100% of the shares of
Macduff Shellfish Group Limited ("Macduff"), the United Kingdom's leading vertically integrated
shellfish company, for a purchase price of £94.4 million plus
approximately £4 million in seasonal working capital debt for a
total of £98.4 million. In addition, there may be additional
consideration paid in the future dependent upon on the future
performance of Macduff.
Ian Smith, CEO of Clearwater
Seafoods said, "The acquisition of Macduff brings together two of
the world's leading and fastest growing vertically integrated wild
shellfish harvesters. The transaction will allow Clearwater to integrate its vessel management
and sustainable harvesting practices, innovative processing
technologies along with its global sales, marketing and
distribution footprint into Macduff; a company that already
possesses a talented local management team, excellent resource
assets and a strong presence in the EU, the world's largest and
most valuable seafood market. Our companies have been
building a working relationship for more than three years and we
are confident Macduff represents a highly attractive investment
with a strong strategic fit for Clearwater."
Euan Beaton, President of Macduff
Shellfish Group said,
"Having reached our goal of building a £52 million business, we
had one suitor in mind which shares our vision and values to enable
us to accelerate our growth on a global scale. With a similar
vertically integrated business model, sustainability at its heart,
sound employee practices and strong relationships with fishermen
but operating on a much bigger scale, Clearwater is an ideal fit for
Macduff.
"This deal is great news for our operations in the UK, bringing
investment and access to new markets within an extremely successful
and respected business. It provides learning and development
opportunities for our staff as we share best practice with
Clearwater and it gives fishermen
access to more markets."
Steven Petrow, Partner at Change
Capital Partners, said,
"When we invested in Macduff in 2011 there was a compelling
opportunity to transform the business through international
expansion and strategic acquisitions. This has been a very
successful investment and we are convinced that the next chapter in
the company's history will be very exciting."
TRANSACTON OVERVIEW AND RATIONALE
Macduff brings abundant access to additional seafood supply in
key markets and channels along with a well-established brand,
UK-based harvesting and processing expertise, a strong local
management team and a talented workforce.
The acquisition of Macduff will significantly enhance
Clearwater's scale, and provide
opportunities to access additional supply to accelerate the growth
of revenues, profit and free cash flow. The transaction:
- Provides access to market leading supply to attractive
complementary species including King and Queen scallops,
langoustine, brown crab and whelk.
- Provides Clearwater enhanced
access to key distribution channels, including food service and
grocery retail, in multiple markets including the UK, Italy, Spain
and Portugal.
- Expands the distribution of Macduff products with Clearwater providing deeper market access as
well as sales and marketing strength in North America and Asia, especially Japan and China.
- Expands Clearwater's North
Atlantic harvesting operations and provides integrated UK-based
primary and secondary processing capabilities and expertise with
land-based processing facilities in Scotland; and
- Creates a new growth platform for Clearwater. Macduff has grown rapidly over the
past four years, has identified multiple growth opportunities and
is the fishing company best positioned to lead and benefit from
future investment.
FINANCIAL HIGHLIGHTS
For the year ended September 30,
2015 Macduff is expected to generate approximately £52
million of sales and £9.2 million of adjusted EBITDA representing
annual growth of 13% and 30% respectively.
In June 2015 Macduff acquired an
additional 4 scallop trawlers and licenses (bringing their fleet to
14 mid-shore scallop harvesting vessels) along with additional
preferred procurement access in complementary shellfish species
(i.e. whelk). This recent investment along with additional organic
growth are projected to help Macduff grow adjusted EBITDA another
25% to £11.5 million in fiscal 2016. In addition Clearwater has identified further
opportunities to invest that will enhance volume, revenue, margins
and adjusted EBITDA in 2016 and subsequent years.
Taking into account the £94.4 million purchase price (which
excludes approximately £4 million in seasonal working capital debt)
and the pro-forma 2016 adjusted EBITDA of £11.5 million, management
estimates the effective acquisition multiple on the transaction is
approximately 8.2 times adjusted EBITDA. The transaction is
expected to be accretive to adjusted EBITDA in 2016 by up to CAD
$0.38 per share and adjusted earnings
by up to CAD $0.17 per share.
FINANCING OF THE TRANSACTION
Macduff will be acquired for cash consideration of £71.4
million, and an unsecured deferred consideration obligation of £27
million (the "Deferred Consideration") that includes a contingent
consideration component.
Clearwater will finance the
cash portion of the acquisition from existing loan facilities.
The Deferred Consideration applies to 33.75% of the shares
acquired by Clearwater (the "Earn
Out Shares"). The deferred consideration will be paid over the next
five or six years.
In each year the holders of the Earn Out Shares can elect to be
paid up to 20% of the total respective Earn Out Shares.
Clearwater will have the right to
exercise the payout of 20% of the total Earn Out Shares annually
commencing two years after the date of closing and annually
thereafter.
The amount of each Deferred Consideration payment will be as
follows:
The greater of:
|
(i)
|
£5.4 million;
OR
|
|
(ii)
|
6.75% of the equity
value of the business calculated as 7.5x the last twelve months
adjusted EBITDA less the outstanding debt of
MacDuff.
|
Leverage is expected to increase with pro-forma leverage of
approximately 5.3x at closing decreasing to below 4.5x by
December 31, 2015 and below 4.0x by
December 31, 2016 when Clearwater and Macduff see the full
realization of recent investments and organic growth. As a
result, management expects to operate above its leverage target of
3.0x with the intention of returning to this goal over the course
of two to three years.
CLOSING OF THE TRANSACTION AND OTHER INFORMATION
Closing of the transaction is subject to customary conditions
and is scheduled for October
30th, 2015.
There are no pending regulatory approvals.
CONFERENCE CALL
Clearwater will hold a
conference call for analysts and investors today (October 9, 2015) at 1:00
p.m. (Eastern Daylight Time) to discuss this announcement in
further detail. To join this conference call, within
Nova Scotia dial (902) 455-3592
and within North America dial
(888) 231-8191. To join this conference call from within the
United Kingdom dial
0-800-051-7107.
Presentation slides for the conference call are available on the
Company's website located at www.clearwater.ca.
To ensure your participation, please dial in five minutes prior
to the scheduled start of the call. You will be required to
identify yourself and the organization on whose behalf you are
participating.
If you cannot participate in the live mode, a replay will be
available until January 8,
2016. To access the replay, please dial (855) 859-2056
and enter passcode 55503728.
NON IFRS MEASURES
This news release makes reference to several non-IFRS measures
to supplement the analysis of Clearwater's results. These measures are
provided to enhance the reader's understanding of our current
financial performance. They are included to provide investors
and management with an alternative method for assessing our
operating results in a manner that is focused on the performance of
our ongoing operations and to provide a consistent basis for
comparison between periods. These non-IFRS measures are not
recognized measures under IFRS, and therefore they are unlikely to
be comparable to similar measures presented by other
companies.
Management believes that in addition to sales, earnings and cash
provided by operating activities, non-IFRS measures are useful
terms from which to determine Clearwater's ability to generate cash for
investment in working capital, capital expenditures, debt service,
income tax and dividends.
These non-IFRS measures can include gross margin, adjusted
EBITDA, free cash flow, leverage, adjusted earnings and return on
assets. Refer to non-IFRS measures, definitions and reconciliations
in the Management Discussion and Analysis ("MD&A") for further
information.
Adjusted EBITDA is defined as EBITDA excluding items such as
severance charges, gains or losses on property, plant and
equipment, gains or losses on quota sales, refinancing and
reorganization costs. In addition recurring accounting gains
and losses on foreign exchange (other than realized gains and
losses on forward exchange contracts), have been excluded from the
calculation of adjusted EBITDA. Unrealized gains and losses
on forward exchange contracts relate to economic hedging on future
operational transactions and by adjusting for them, the results
more closely reflect the economic effect of the hedging
relationships in the period to which they relate. In addition
adjustments to stock based compensation have been excluded from
adjusted EBITDA as they do not relate to the operations of the
business.
Leverage is defined as adjusted EBITDA less minority share of
adjusted EBITDA divided by debt (less Clearwater's share of cash).
Free cash flow is defined as cash flows from operating
activities, less capital expenditures (net of any borrowings of
debt designated to fund such expenditures), scheduled payments on
long term debt and distributions to non-controlling
interests. Items excluded from free cash flow include
discretionary items such as debt refinancing and repayments,
changes in the revolving loan and discretionary financing,
investing activities and cash settled stock based compensation.
COMMENTARY REGARDING FORWARD-LOOKING STATEMENTS
This news release contains "forward-looking information" as
defined in applicable Canadian securities legislation. All
statements other than statements of historical fact, included in
this release, including, without limitation, statements relating to
Clearwater's acquisition of
Macduff, financing of the acquisition, enhancement of Clearwater's scale of operations and
accelerated growth, as well as expectations regarding sales,
adjusted EBITDA, adjusted earnings and leverage, constitute
forward-looking information that involve various known and
unknown risks, uncertainties, and other factors outside
management's control. Forward-looking information is
based on a number of factors and assumptions which have been used
to develop such information but which may prove to be incorrect
including, but not limited to, Clearwater's ability to successfully integrate
the business of Macduff as planned, total allowable catch levels,
selling prices, weather, exchange rates, fuel and other input
costs. There can be no assurance that such information will
prove to be accurate and actual results and future events could
differ materially from those anticipated in such forward-looking
information. Risk factors that could cause actual results to
differ materially from those indicated by forward-looking
information contained in this press release include risks and
uncertainties related to: (i) the timing to consummate the
acquisition, (ii) diversion of management time and attention on the
acquisition, (iii) any disruption from the acquisition affecting
relationships with customers, employees or suppliers, (iv) the
timing and extent of changes in interest rates, prices and demand,
and (iv) general worldwide economic conditions and related
uncertainties. For additional information with respect to
risk factors applicable to Clearwater, reference should be made to
Clearwater's continuous disclosure
materials filed from time to time with securities regulators,
including, but not limited to, Clearwater's Annual Information Form.
The forward-looking information contained in this release is
made as of the date of this release and Clearwater does not undertake to update
publicly or revise the forward-looking information contained in
this release, whether as a result of new information, future events
or otherwise, except as required by applicable securities laws.
No regulatory authority has approved or disapproved the adequacy
or accuracy of this news release.
ABOUT CLEARWATER
Clearwater is one of
North America's largest vertically
integrated seafood companies and the largest holder of shellfish
licenses and quotas in Canada. It
is recognized globally for its superior quality, food safety,
diversity of species and reliable worldwide delivery of premium
wild, eco-certified seafood, including scallops, lobster, clams,
coldwater shrimp, crab and groundfish.
Since its founding in 1976, Clearwater has invested in science, people and
technological innovation as well as resource ownership and
management to sustain and grow its seafood resource. This
commitment has allowed it to remain a leader in the global seafood
market and in sustainable seafood excellence.
Further information is available on Clearwater's website at www.clearwater.ca
ABOUT MACDUFF
Macduff Shellfish Group ("Macduff") is one of Europe's leading wild shellfish processors and
is a vertically integrated business, owning 14 mid-shore scallop
harvesting vessels and production plants in Mintlaw and
Stornoway, Scotland.
The business specializes in scallops, langoustines, whelk
and crab, has sales of approximately £52 million and trades
globally, employing over 400 people at the seasonal peak.
Macduff has been an active consolidator in the UK fishing sector
in recent years acquiring Scott Trawlers, Saltire Fisheries, four
vessels and a whelk procurement and distribution business from The
Greendale Group and the former Young's Seafood factory in
Stornoway.
The business was set up in 1985 by the Beaton family in Macduff,
buying and selling live shellfish direct from the fishermen for
freight to Europe. The factory in Mintlaw was bought in 1996
as the company diversified from chilled into frozen shellfish, the
mainstay of its current operation.
Further information is available on Macduff's website at
http://macduffshellfish.co.uk/
ABOUT CHANGE CAPITAL PARTNERS
Founded in 2003, Change Capital is a private equity partnership,
dedicated to making investments in consumer-oriented businesses
across the European lower mid-market. The firm brings both capital
and operational experience to enable brands and retail concepts
that have established a distinctive customer proposition to secure
the next stage in their development.
The firm has so far deployed c. €440 million through 13
acquisitions across Europe. Its
portfolio is diversified by geography, sector and investment
holding period.
Change Capital Partners is registered in the UK and is
authorized and regulated by the FCA.
Further information is available at
http://changecapitalpartners.com
SOURCE Clearwater Seafoods Incorporated