China Fishery Group

Pacific Andes to re-visit ‘legal position’ with Russian government

Pacific Andes is to re-visit the legal position of its sourcing arrangements for Russian pollock, following reports the Russian government is forcing the company to sell assets it still denies owning.

The company, responding to the story that broke on Nov. 28 that the Russian Federal Antimonopoly Service (FAS) was forcing it to sell assets, acknowledged the reports, but continued to deny it owns fishing vessels or quotas in Russia.

Based on the “latest available legal advice”, the group believes its supply of fish “is in compliance with existing Russian law, and is sustainable”, said the company, which completed the fourth of its pre-payments to Russian suppliers recently.

“However, in view of these recent media reports, the group, in prudence, will re-visit the legal position with lawyers and will try to seek further clarifications with FAS,” it said.

http://www.undercurrentnews.com/2012/11/...Lw4Sddy2f4

S&P revises China Fishery outlook to negative; afrms 'B+' rtg

Our liquidity assessment incorporates the following expectations and assumptions:

-- China Fishery's sources of liquidity, including cash of about US$120 million, a committed revolver line, and FFO of close to US$150 million as of Sept. 30, 2012, can cover its uses of liquidity by more than 1.2x over the next 12 months.

-- As of Nov. 30, 2012, China Fishery has about US$120 million in undrawn committed revolver facilities. However, in our opinion, these facilities might not be available if the company experienced any material negative operational shock.

-- Liquidity uses include debt repayments, committed capital expenditure, working capital needs, and dividend.

-- The company will be in compliance with its financial covenants even if EBITDA declines by 10%.

-- The group has a good standing in the credit markets, particularly with banks such as Hongkong and Shanghai Banking Corp., Standard Chartered Bank , and Rabobank.

Outlook

The negative outlook reflects our view that the risk of adverse effects on China Fishery's Russian operations over the next six to 12 months could be significantly higher than we had earlier expected. However, we understand that the company is still seeking clarification from the Russian government.

We could lower the rating if: (1) China Fishery loses material contract fish supply in Russian waters, experiences severely weaker profitability, or is heavily fined for breaching the laws in that country; (2) the company's liquidity position deteriorates to "weak"; or (3) the financial performances of China Fishery's direct and indirect parent companies, Pacific Andes Resources Development Ltd. (not rated) and PAIH, weaken materially, such that PAIH's total-debt-to-EBITDA ratio exceeds 6.0x.

Rising regulatory risk limits the rating upside for the next few years. We could revise the outlook to stable if the situation in Russia stabilizes so that the revenue generation and profitability of China Fishery's contract supply business do not deteriorate materially. We could also revise the outlook if the company diversifies geographically, improves its product mix, and maintains a solid financial performance.

http://www.reuters.com/article/2012/12/0...5420121204

The company just announced a massive 1-for-1 rights issue at $0.34.

Rationale for the Rights Issue
The Rights Issue has been proposed to enhance the Group’s financial capacity and flexibility in pursuing strategic growth and acquisition opportunities, and to provide the Company with additional capital for capital expenditure and working capital to cater for the continuous development of the acquired or expanded entities, as well as the current businesses of the Group.

The Rights Issue is not conditional on obtaining approval of Shareholders at the EGM for the Acquisition or the successful closing of the Voluntary Cash Offer. Further, the Rights Issue cannot be conditional upon the
successful closing of the Voluntary Cash Offer as net proceeds of the Rights Issue are required to partially fund the Voluntary Cash Offer. If the Acquisition proceeds, the net proceeds of the Rights Issue will be used to partially fund the Voluntary Cash Offer.

SGX Announcement 1
SGX Announcement 2
Press Release

It looks increasingly likely for the bid to fail. But the rights issue wil still proceed. Wow for shareholders.

The Straits Times
www.straitstimes.com
Published on Mar 02, 2013
PLAY OF THE WEEK
China Fishery down 18% on takeover bid
Ambitious $689m plan to buy Peru firm may have led to investor jitters

SHARES of China Fishery Group lost 12.5 cents or 18 per cent over the week as investors baulked at its ambitious US$556 million (S$689 million) takeover of Oslo-listed Copeinca - Peru's second largest fishmeal producer.

At yesterday's close of 58 cents, the stock is not too far off its one-year low of 53 cents in mid-December last year.

The selling may have been caused by concerns the aggressive acquisition will be partly funded by a rights issue which would dilute its earnings per share.

China Fishery expects to raise at least $344.2 million from a one-for-one underwritten rights issue, a US$295 million loan facility and internal resources.

OSK-DMG Research expects the firm's earnings per share to decline from 7.64 US cents to between 5.26 US cents and 6.7 US cents post-acquisition.

Shares of parent Pacific Andes Resources Development, which owns 70.51 per cent of China Fishery and will subscribe to 81.82 per cent of the cash call, also fell. It lost 9.6 per cent over the week to close at 14.1 cents yesterday.

Over the past few years, China Fishery has scooped up several Peruvian fishmeal firms but Copeinca would be the biggest yet. "We believe this acquisition could generate synergies between the two companies given the overlapping principal business activities," said OSK-DMG Research.

The rationale for the acquisition is easy to appreciate: It would turn China Fishery into Peru's largest producer of fishmeal and fish oil with a 16.9 per cent catch quota in North and Central Peru and 14.7 per cent in South Peru. It would also help the firm diversify its revenue base from its core contract supply division.

But so far, the proposed acquisition is not going well.

Copeinca has rejected the unsolicited offer, saying that two major shareholders who collectively own 36.8 per cent interest in the Peruvian firm do not plan to accept it. The offer for Copeinca is conditional on a minimum shareholding of 50.01 per cent.

Following the proposed buyout, rating agency S&P has placed China Fishery on a creditwatch negative describing the bid as an "aggressive move" given the group's large cash outlay and very low cash position.

Another agency, Moody's, takes a different view. It opined that the proposed takeover offer would not have an immediate impact on the firm's financial and liquidity positions. In fact, Moody's said if the takeover were successful, it would reduce China Fishery's reliance on its Russian contract supply business which faces increasing regulatory risks.

If the bid flops, the rights issue will still proceed. That may partly explain the jitters surrounding the counter.

According to OSK-DMG Research, if the deal does not pan out and assuming a minimum subscription scenario, shareholders could face a 50 per cent fall in China Fishery's earnings per share for financial year 2014.

anitag@sph.com.sg

The Straits Times
www.straitstimes.com
Published on Mar 14, 2013
COMPANIES
China Fishery boosts bid to take over Peruvian firm
Singapore-listed company has secured 41.5% of Peru's 2nd biggest fish exporter

By Anita Gabriel Senior Correspondent

CHINA Fishery Group has bolstered its takeover bid for Peruvian firm Copeinca by striking a deal with the company's second biggest shareholder.

Ocean Harvest has agreed to sell a 9.9 per cent stake in Copeinca to China Fishery for US$54.8 million (S$67.9 million). It has also pre-accepted a cash offer for a further 4 per cent.

Singapore-listed China Fishery said in a statement yesterday the Ocean Harvest deal was a "further strong endorsement" of the cash takeover offer.

China Fishery also has binding commitments of about 29 per cent of Copeinca shares and indicative positive support of 2.6 per cent.

This means it has already secured about 41.5 per cent of the company, which is Peru's second biggest fish exporter, before the cash offer period has begun. It needs at least 50.01 per cent for the US$556 million cash offer to go through.

The bid, described as hostile and rejected by Copeinca soon after it was lodged on Feb 26, may now have a good chance of succeeding.

Oslo-listed Copeinca, which has a secondary listing in Peru, has since appointed UBS, DNB Markets and Carnegie to advise on its options and to "explore alternatives". No other suitor has emerged to take the bait so far.

China Fishery's aggressive moves to build up its stake since announcing the bid come despite opposition from Copeinca's majority shareholder, the Dyer Coriat family. The family holds 38.6 per cent of Copeinca, not enough to throw a wrench in the works of China Fishery's ambitious bid.

On Feb 27, Copeinca said it had rejected the offer, which was made without contacting the company's board of directors.

China Fishery's offer of 53.85 krone (S$11.78) for each Copeinca share represents a premium of almost 30 per cent to its three-month volume-weighted average price.

It expects to fund the acquisition through a rights issue, loan and internal resources.

Shareholders will vote on the acquisition and the rights issue at an extraordinary general meeting on March 19.

Pacific Andes Resources Development, which owns 70.51 per cent of China Fishery, will subscribe to at least 81.82 per cent of the one-for-one renounceable rights issue, which is expected to raise at least $344.2 million.

Shares of China Fishery fell 0.5 cent to 56 cents, while Pacific Andes slid 0.1 cent to 13.7 cents yesterday.

anitag@sph.com.sg

China Fishery Group's takeover bid of Copeinca may now run into a seawall, even as it gave a statement yesterday on its plans post-acquisition. Its acquisition target Copeinca, the second largest fishing firm in Peru, has indicated that it is scouting around for suitors who can outbid China Fishery Group, and that it is "actively considering all options to maximise value" for its shareholders. A key focus lies in continued talks with potential parties who might make a better offer, and within the timeframe of China Fishery's offer, Copeinca said yesterday. (BT)

So, indeed, the deal is moribund. So what now with the rights issue? Will the share price recover a bit? It puts the company on a stronger financial footing.

http://www.undercurrentnews.com/2013/04/...V8BUJEayK0

I guess it depends whether they will launch a counter-bid. If not, the Management can be pleased with the opportunistic profits made from the eventual disposal of their 9.9% stake to Cermaq. The recent rights issue will also strengthen their balance sheet for M&A and debt repayment. I guess the key issue is the status of the fishing fleet in Russia and the possible legal issues that may come from it.

(Not Vested)

(06-04-2013, 11:05 AM)Nick Wrote: I guess it depends whether they will launch a counter-bid. If not, the Management can be pleased with the opportunistic profits made from the eventual disposal of their 9.9% stake to Cermaq. The recent rights issue will also strengthen their balance sheet for M&A and debt repayment. I guess the key issue is the status of the fishing fleet in Russia and the possible legal issues that may come from it.

(Not Vested)

Hmm wow I guess with the recent news Management must be fishing for compliments (no pun intended!). Still, shareholders have to ask if they had rightly funded the rights issue for a good purpose or not. Will the cash be put to good use? It remains to be seen.

I looking at the books of both company, looking at COF's EV/EBIT if there is a bidding war, price can still swing up but i dont think China fish has the ammo/war chest to go down that path without overstretching itself. I prefer they fail and divest their stake to Cermaq. Considering that option, its trading way below its cash/nav value now, bought some extra rights

(vested)