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One Man's Opinion: On the finance hook — again

Property of SeaFood Business magazine
By Peter Redmayne
July 01, 2008

After a long hiatus, investing in the fish business is again considered by some money mavens to be a good bet. The last time anybody thought the fish business was worth throwing money at was the late 1980s and early 1990s, when ConAgra and Tyson Foods ploughed their profits into all things edible.

The current crop of investors know a lot about money, but not so much about fish. The most ambitious investment to date has been the $200 million plunked down by San Francisco-based Fox Paine, a private-equity firm that acquired Icicle Seafoods last year.

Started in the 1970s by fishermen from Petersburg, a scenic port in Alaska's Southeast Panhandle, Icicle was long considered a bit of a weak sister in the state's rough-and-tumble seafood industry. Every few years, rumors were rampant that Icicle was on the verge of going belly up, like a spawned out salmon.

In the late 1990s, though, Alaska whitefish became white gold following the passage of the American Fisheries Act, which closed the door to any new entrants into the Last Frontier's increasingly lucrative bottomfish business. Although its entry was a belated one, Icicle's fortunes improved markedly after it started processing whitefish.

No doubt the concept of a finite resource, and rising global demand for it, caught the radar of the MBAs at Fox Paine. That made a lot of people at employee-owned Icicle very, very happy, as a slew of millionaires was minted from the docks in Petersburg to the corporate offices in Seattle.

But as Icicle soon learned, money mavens aren't satisfied with the status quo. They buy a company with $300 million sales to turn it into a company with $1 billion in sales. Then they sell it - it's all about the exit strategy. And how do you grow sales? Acquisitions.

The problem with the fish business is that there aren't a lot of companies worth buying. And the ones that are usually are owned by iron-fisted, top-down managers who dominate and micromanage every aspect of the business, which is why these companies are profitable in an industry with low margins.

Icicle's first big acquisition, the protracted purchase of Smoki Foods in Seattle, was not particularly smooth. Smoki owner Rodger May played the money mavens adroitly, telling the fish press that he wanted $50 million for his company, which had sales of about $100 million. After negotiations stalled, he told the scribes that he'd really like to be acquired by Trident Seafoods, Alaska's largest processor, and Icicle's arch competitor. With Fox Paine breathing down its neck, the boys at Icicle held their nose and made May a very wealthy man.

Icicle's latest deal is a rather curious one. Last month it acquired Cresting Wave, a Seattle seafood trading company that made its living trading seafood produced by Icicle's smaller competitors. It remains to be seen how adding a new sales staff to an existing sales staff will do much to increase revenues.

May and Icicle managers have employment contracts that keep them tethered to Icicle for the time being. But who wants to keep taking marching orders from a 
bunch of MBAs who don't know the fish business?


Contributing Editor Peter Redmayne lives in Seattle


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