The $85 million purchase of Skeggs Group-owned Pacifica Seafoods by listed fishing company Sanford will give it a 45% stake in the New Zealand greenshell mussel trade.
Brokers Forsyth Barr and Craigs Investment Partners believe the acquisition will be positive for Sanford, being immediately cash-flow positive and good for the aquaculture industry overall.
Sanford, which received Commerce Commission clearance last week to make a bid for the business, is still to announce prearranged funding before the deal goes unconditional.
Confirmation of the purchase comes in the same week the Government has thrown its weight behind the aquaculture industry's bid to become a billion-dollar export sector, The New Zealand Herald reported.
New legislation, read for the first time on Tuesday, seeks to remove regulatory roadblocks and streamline the consent process for new marine farms.
The Government is using the annual aquaculture conference, which began in Nelson yesterday, to officially launch an aquaculture unit that will be its lead advisory agency on the sector.
The industry is targeting growth in export sales from $380 million to $1 billion by 2025.
Sanford cited the United Nations Food and Agriculture Organisation's predictions that seafood consumption is set to increase 35% during the next decade and aquaculture's input will increase from 42% of present production to almost 60% during that period.
Forsyth Barr broker Peter Young said the Pacifica acquisition would enable a more co-ordinated development of export markets over time.
"The greenshell mussel price has been weak over the last two years, due in part to the global financial crisis but also driven by New Zealand producers undercutting one another," Mr Young said.
Sanford was already the largest producer of greenshell mussels in the country, with a 25% market share and production of about 23,000 tonnes, but with the Pacifica purchase, that share would increase to about 45% of greenshell mussel production, he said.
Mr Young said that while the assets would be cash-flow positive over the medium term, there were risks surrounding the magnitude and timing of potential synergies - which could amount to between $2 million and $4 million over time.
Craigs Investment Partner Peter McIntyre said the enlarged Sanford stake in aquaculture should reflect well for the entire industry.
While there was "strong growth potential" and, potentially, several million dollars to be gained in synergies, he said Sanford historically had "volatile earnings" because of its exposure to the exchange rate with the US dollar.
He also noted many of its aquaculture assets were based in the Marlborough Sounds, which meant an increased risk of disease or weather affecting production.
The purchase was bankrolled by a new three-year, $90 million, loan facility from the ANZ and Rabobank, which Sanford said fell well within banking covenants.
Pacifica purchase
Sanford's $85 million purchase pays for:
$62 million - Marine farm licences, structures and crop.
$20 million - Properties, vessels, plant and equipment.
$3 million - Finished goods and raw materials.
- 295 Pacifica employees switch to Sanford's, but subject to restructuring.
