Two major deals have the potential to dramatically change the industry landscape in New Zealand
Consolidation in the commercial fishing industry is concerning for some industry players, as the Commerce Commission addresses the second industry-defining acquisition this year.
Earlier this month the antitrust regulator approved a massive deal between NZX-listed Sanford and iwi-owned Moana New Zealand.
Last week it began considering another acquisition that would form New Zealand’s largest seafood business by a stretch.
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The Commerce Commission is yet to release the decision behind its approval of the Sanford/Moana deal, which involves Moana buying Sanford’s inshore annual catch entitlement for 10 years.
Moana will initially pay about $11 million a year for the rights, increasing to $13m over five years before scaling up in fixed increments of 1.5 percent a year.
Sanford has quota shares equivalent to 16.4 million kg of inshore seafood, inshore being caught in depths of up to 200m.
Moana, created by the Māori Fisheries Act, is also purchasing two fishing vessels, processing equipment and a marine farm for between $5m and $8m.
Moana’s existing inshore fishing quota was withheld from the publicly released application to the commission, though Newsroom understands it to be just shy of 5 million kg, not including any other leased catch entitlement.
There has been some suggestion this deal would take Moana’s control over catches of snapper above the allowable threshold in the Fisheries Act.
However, the act relates to the ownership of quota shares, not annual catch entitlements.
The power wielded by a significantly larger Moana was a concern to some submitters.
Market advantage
Jason McGrath of the Tauranga Fishing Company, which has harvested fish for Sanford since 2006, said the terms of the deal would give Moana a strong market advantage.
His submission said this included it possibly having the ability to regulate the price paid to independent fishers, as well as regulating sales pricing from the contracted harvesters, retailers and supermarkets.
This potential power was not lost on the Commerce Commission, which raised the possibility that post-acquisition Moana could restrict the amount of annual catch entitlement available to existing or potential competitors.
This would have an impact on the ability of these competitors to compete with Moana in downstream wholesale markets and would increase the wholesale price of fresh fish.
McGrath also expressed concern that currently contracted Sanford harvesters may not get a fair market contract, if current Moana contractors were looked after over and above outside contractors.
This stance was echoed by a far shorter anonymous submission to the commission: “Sanford inshore fishery fleet north Island really look after their fisherman workers good pay, they always try to improve their environmental impact [and hire] all NZ workers.
“Moana doesn’t really look after their fisherman they make them work for the bare minimum always giving them enough to survive not too much more. A few private owners have done well by using massive power and huge nets in the shallow waters and immigrant labour.”
Equal opportunity
McGrath’s ultimate view was that if all market participants were treated with equal opportunity then the transaction could be a positive movement for the whole industry sector.
Similarly, Nino Basile of Deep Blue Seafoods believes the continued rise of fishing mega entities could close smaller players out of the market or cause them to leave.
In his submission, he said certain smaller fish companies had to work with other larger ones to harvest their catch entitlement. “If there is not a provision to protect us as such then we will be left without the ability to have access to fish at a competitive rate and be forced to sell our annual catch entitlement cheap following the potential closing of our business.”
He said both Moana and Sanford had done this in the past but the deal could change the dynamic. “It is important to be mindful of what happened with Telecom and as such we need the fishermen to be able to be free of pressure as may happen if one party has the tipping point of annual catch entitlement in their favour.”
Other anonymous submitters felt the deal would severely lessen competition and create a monopolistic environment in the North Island inshore fisheries.
Despite concerns, the commission ultimately approved the deal, meaning it was satisfied the transaction was unlikely to substantially lessen competition in any New Zealand market.
Independent deal
Sealord’s planned acquisition of Christchurch-based Independent Fisheries is the second mega acquisition of the month, creating New Zealand’s biggest seafood business with a total annual catch allocation of 155 million kilos.
The deal will mean Sealord controls 38.41 percent of New Zealand’s hoki quota, and will remove one of the few large fishing businesses from the sector, leaving just Sealord, Sanford, Talleys, Vela Fishing (which does no fishing of its own), and Moana.
Moana is also half-owner of Sealord, alongside Tokyo Stock Exchange-listed Nissui Group.
The deal requires approval from the Commerce Commission and the Overseas Investment Office.
Both businesses fish offshore, in waters more than 200m deep, targeting hoki, orange roughy, dory, ling, squid and jack mackerel, but Sealord also has food processing and import functions.
If approved, it will substantially change the landscape of New Zealand’s fishing industry and in effect extend Moana’s industry interests, though Sealord’s application to the commission paints it as a lower-risk deal because the businesses don’t rely on contract fishing businesses.
