By Josh RubinStaff Reporter
Nova Scotia lobster has long been sought by gourmands who favour its slightly sweet, rich flesh. Now, even investors are fighting over it.
Bedford, N.S.-based Clearwater Seafood Income Fund, which runs one of the country’s largest lobster and scallop-fishing companies, announced Friday that it’s the subject of a hostile takeover bid from Cooke Aquaculture Inc., based in New Brunswick.
Cooke, which is privately held, bought a 20 per cent share in Clearwater earlier this year.
Cooke offered $3.50 for the Clearwater units it doesn’t hold, and also says it will buy convertible debentures and convert them to stock, the Clearwater fund said Friday. The bid values the fund at about $97.1 million.
The fund’s units doubled in value in early trading on the Toronto Stock Exchange, rising as high $3.23, before falling back down to close at $2.43, a gain of 88 cents on the day.
Clearwater said its parent company, Clearwater Fine Foods Inc., which controls 48 per cent of the voting rights in the fund, wouldn’t be selling its stake, and that CFFI believes the bid didn’t value the company properly. CFFI also announced plans to buy back units and debentures in the trust.
“Additionally, CFFI have told the trustees it believes there are other unitholders, which together with CFFI would hold over 50 per cent of the fully diluted units, who would share CFFI’s views in this respect,” the fund said in a statement.
That announcement prompted a harsh reply from Cooke, which said the bid represented a 132 per cent premium on the units’ average value.
“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 and Clearwater has not paid any distributions to unitholders since January 2008,” Cooke said in a press release. The release also took a shot at Clearwater insiders.
“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 unitholder rights plan to ensure that insiders of Clearwater cannot acquire trust units and prevent minority unitholders from benefiting from this very attractive proposal,” Cooke said. Trading volume was 865,656 units Friday, up from the average 28,000.
Cooke made its bid on July 26. That day, trading volume hit 74,100 units, roughly 2.5 times the average volume.
In second-quarter financial results released Friday, the fund said its operating division, Clearwater Seafoods LP, had a net loss of $332,000, down from a loss of $5 million a year ago.
Cooke has been on a takeover spree lately. Last month, it bought Culmarex SA, a sea bass and sea bream farming company in Spain, adding to its farm holdings in Canada, the U.S. and Chile.
Cooke has been heavily criticized by environmental groups for plans to expand its salmon farming into Nova Scotia’s St. Mary’s Bay.
Last year, Cooke’s offices were raided by Environment Canada staff looking for evidence it may have used cypermethrin, an insecticide banned in Canada that is sometimes used to treat sea lice in farmed fish. The investigation is still ongoing.
Hundreds of lobsters pulled from the Bay of Fundy in late 2009 were dead or dying, and tests confirmed the presence of cypermethrin.