Here’s the most important thing you need to know about the potential sale of Clearwater Seafoods Incorporated (TSX: CLR): it won’t happen unless they find the right buyer, says co-founder, chairman and president John Risley.
Founded in 1976 under the humblest of circumstances—by Risley, Colin MacDonald and a pickup truck borrowed from Colin’s brother, Mickey—Bedford, N.S.-based Clearwater is now the largest holder of shellfish licenses and quotas in Canada. They’re also one of North American’s largest vertically-integrated seafood companies, which means they catch, process and sell seafood. They have harvesting operations in Canada, Argentina and the U.K., distribute product to 58 countries (and counting), and reliably achieve annual sales in excess of $600 million. But big as they are, Risley says they aren’t big enough.
“Clearwater’s growth prospects are on the international scene, they’re not here in Canada,” says Risley.
He says his attempt to merge St. John’s-based Fishery Products International and Clearwater in the early 2000s would have created the appropriate economy for scale for Atlantic Canada to be a global competitor. “The fact it failed is on me,” he says. “I was politically naïve and didn’t go about it in the right fashion. That’s a regret. It should have happened. It was my mistake.”
On the line
Today, you could say Clearwater’s getting a second chance, thanks to unsolicited offers from as-yet unnamed interested parties. But rather than limit themselves to those expressions of interest, Clearwater has established a special committee of independent directors to investigate all of its options. According to the company’s March 5 press release, the committee’s primary objective is to enhance shareholder value. Shareholder value, according to Risley, is a fancy way of saying they won’t sell at the current stock price. “That doesn’t reflect the true value of the company,” he says.
Currently trading at $5.53 a share, TSX: CLR is priced at less than half what it was fetching on the market between 2015 and 2017. During that two-year span, the price never went lower than $10 a share, and even traded as high as $14.97. But despite having better financial results now than they did back in 2017, Clearwater’s share price has never recovered from the hit it took following the clam license fiasco.
“We’re not happy with the share price,” says Risley. Meaning? “We’re not going to sell on the cheap.”
Is $10 a share their target sell price?
“We don’t have any number in mind.”
So why multiple offers—and why now?
“That’s a good question. I don’t know. You’ve got a low interest environment, you’ve got a fairly active consolidating industry generally and maybe people are wondering what we want to do with this business.”
Why is this the right time for you, Colin and Mickey to walk away?
“We don’t see ourselves as walking away in that context. All three of us live and work here and invest here. We’ve got a huge number of other businesses here in Atlantic Canada and Canada generally. Any proceeds from this sale are just going to go back into those same kind of investments.”
Landing the big one
“We’ve been at this for 44 years. Neither Colin nor Mickey nor I are involved in the day-to-day management of the business,” says Risley. “And none of us have children who are interested in the business. Do we hang on until we’re dead and buried, leaving our heirs—who aren’t familiar with the business—to decide this company’s future? This is our opportunity to pick a good owner for the business going forward.”
What constitutes the right owner?
“Somebody who wants to continue to invest in the business. Somebody who understands the role that a seafood company plays in rural Atlantic Canada as the principal employer in the towns where it does business,” says Risley. “Ultimately, it doesn’t matter who owns it. The business that we do here, the employees that we have here, they aren’t going anywhere.
“If we don’t find the right buyer, we won’t sell. But we’re not prepared to let the company’s stock price languish in the range that it has for the past couple of years. It’s ridiculous.”