On the surface, it would seem like a bad time for Nova Scotia’s High Liner Foods Inc., which makes frozen fish sticks and other prepared seafoods, to go fishing for an acquisition in Iceland. In recent months, local pop star Björk has mustered a remarkably successful campaign aimed at overturning another Canadian-led takeover effort: Magma Energy Corp.’s recently completed purchase of geothermal power producer HS Orka. Just last week, Björk held a three-day karaoke marathon that helped to boost signatories of a local petition against the Magma deal to more than 46,000, or about 15 per cent of Iceland’s population, causing Iceland’s prime minister to hint that a public referendum on the deal could yet be forthcoming.
But that hasn’t stopped High Liner, headquartered in picturesque Lunenburg, N.S., and known for its salty, grey-bearded fisherman logo, from steaming ahead with its plans to buy Icelandic Group, which controls a network of independent seafood processing companies in Europe, North America and Asia. If successful, High Liner, already a leader in Canada, would become a major force in the huge U.S. market supplying seafood to supermarkets and restaurants. There’s just one problem: Icelandic’s owners, a consortium of public pension funds called Framtakssjóður Íslands, aren’t interested in selling—at least not to High Liner.
Kelly Nelson, High Liner’s chief financial officer, says the company has been eyeing Icelandic for years and was assured that if the company’s foreign processing businesses ever went on the block, High Liner would have an opportunity to bid in an open auction (producers located in Iceland itself aren’t believed to be for sale). “We found out that they have entered into exclusive discussions with a German private equity firm called Triton,” Nelson says, noting that Icelandic has been in a difficult financial position for a few years, having been previously owned by a state-run bank set up after the 2008 financial crisis. “We also found out through different sources in Iceland that maybe this was an inside deal being cooked up, and we didn’t think this was fair to the Icelandic pension plans that own these assets, or other bidders.”
Nelson says he doesn’t know why High Liner is being shut out. The company has put forward a bid valuing Icelandic at 340 million euros, or $448 million, but has received no response. But he says it’s doubtful that it has anything to do with the nationalistic opposition to the Magma deal. “The Magma thing has never come up,” he says. “This is a worldwide company that has operations in Iceland, which are not for sale.” It’s not clear whether Björk has formed an opinion on the issue. Her opposition to the Magma deal appears to have more to do with the sale of the country’s energy and resource assets, as opposed to outright protectionism. Icelandic’s pension fund owners said in a statement that talks with Triton are continuing. A spokesperson declined to comment further.
High Liner has been bulking up its business lately. Four years ago, the company paid $158 million for the North American marketing division of Fishery Products International, including plants in Burin, Nfld., and Massachusetts. Then, last December, it paid US$31.5 million to buy Massachusetts-based Viking Seafoods Inc. as part of a move to expand its presence in the United States.
Now High Liner is poised to take a leadership position south of the border by buying Icelandic, which, through its U.S. operations, is a major competitor. “To carve out that kind of leadership position in the U.S. market for any Canadian company is significant and game-changing,” Nelson says, adding that the industry is going through a period of significant consolidation worldwide.
As a result, High Liner is not willing to let Icelandic slip away quietly. As part of a last-ditch effort, the company’s advisers suggested High Liner go public with its bid in the hopes that it would put pressure on Icelandic’s public pension fund owners to hold a public auction. “They said, ‘Look, Iceland’s a pretty small place and this is a pretty big company, and if people got wind of this [private deal] they would be pretty upset,’ ” Nelson says.
So far, the campaign seems to be having a desired effect, generating significant media coverage in the island country. But has it given High Liner a seat at the negotiating table? “There hasn’t been anything material that’s transpired,” Nelson says. “But it’s not a dead issue either.”