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