Saturday, August 13, 2011

BREAKING NEWS: Cooke's bid for Clearwater dead in the water

Cooke fails to grab bigger stake in Clearwater
Founders: N.B. firm's bid to buy all outstanding fund units is dead in the water
By JOANN ALBERSTAT Business Reporter
Sat, Aug 13 - 6:27 AM

Clearwater Seafoods said Friday that Clearwater Fine Foods Inc., which has a 48.2 per cent interest in the Seafoods Income Fund, has indicated it’s not interested in selling. It killed an effort by New Brunswick’s Cooke Aquaculture to purchase all outstanding fund units.

THE LATEST BID by New Brunswick’s Cooke Aquacul­ture to increase its stake in Clear­water Seafoods Income Fund is dead in the water, say the Nova Scotia seafood firm’s founders.

Cooke made an offer July 26 to purchase all outstanding fund units for $3.50 each, making the proposal worth $159 million.

The fund has more than 51 million units, including 5.6 million owned by Cooke. That represents 20.2 per cent of the fund and 10.9 per cent of total outstanding voting rights.

Clearwater Seafoods issued a news release Friday saying Clearwater Fine Foods Inc. , which has a 48.2 per cent interest in the fund, has indicated it’s not interested in selling.

Clearwater Fine Foods is owned by fund co-founders Colin MacDonald and John Risley. The company holds almost 1.3 mil­lion units of the fund and is the sole owner of 23 million special trust units.

Clearwater Fine Foods says in the release that at least 50 per cent of fund investors agree with its stance.

MacDonald, who is chairman of Clear­water Seafoods, said Friday his company made its position known because Cooke’s bid is too low.

“It doesn’t represent fair value for our unit holders, at the end of the day," he said in an interview.

MacDonald also said he won’t be selling at any price.

“We’re long-term holders. We have no interest in selling whatsoever."

When MacDonald and Risley, his brother­in- law, turned Clearwater Seafoods into an income trust in 2002, investors paid $10 per unit.

Cooke stood by its offer Friday, saying it represents a 132 per cent premium to in­vestors, based on the average unit price over the 20 days prior to the bid.

“Cooke believes that the proposed offer of $3.50 represents a full and fair value for the trust units, which have not traded above $2 since October 2008," the company said in a news release.

The company, which made a similar bid that was rejected last month, said it wants to keep talking to the fund’s board. Clearwater Seafoods said Friday the new proposal is still being reviewed.

Meanwhile, word of Cooke’s latest offer took a twist later in the day when Clearwater Seafoods announced plans to buy back up to $5 million in fund units and convertible debentures.

The New Brunswick company responded by saying Clearwater Fine Foods is attempt­ing to increase its ownership in the fund and block its offer.

“Cooke notes the unusual high volume of trading activity over the course of the day in the trust units and would request that the board of trustees of Clearwater adopt a unit holder rights plan to ensure that insiders of Clearwater cannot acquire trust units and prevent minority unit holders from bene­fiting from this very attractive proposal," the release said.

More than 860,000 fund units were traded Friday on the Toronto Stock Exchange.

Clearwater Seafoods led the TSX in gains for the day, with the unit price increasing almost 57 per cent. The closing price was $2.43, up 88 cents from Thursday.

Unit values were helped by the release of positive results Friday for the second quarter of 2011.

The fund reported a $12-million, or 44 per cent, increase in earnings before interest, taxes, depreciation and amortization, com­pared with the same period in 2010.

Growth of second-quarter earnings was attributed to improved sales prices and a shift to higher-margin species, partially off­set by lower sales volumes, higher harvesting costs per pound and a stronger Canadian dollar.

Fund officials say Cooke’s proposal won’t change plans to convert to a corporation later this year. Trust unit holders are slated to vote on the change at an Aug. 25 meeting.

Cooke, which has six salmon farms in Nova Scotia, recently announced plans to build two large operations in St. Mary’s Bay near Digby.

It also has plans to build three more sal­mon farms and a processing plant in Shel­burne as part of a $150-million expansion in the province that could create hundreds of new jobs.

But those plans have alarmed environ­mentalists and fishermen concerned about the scope of the proposed operations and their potential impact on traditional fisher­ies.


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