SET-listed Thai Union Frozen Products Plc (TUF), the world's top exporter of canned and frozen tuna and shrimp, is buying US rival Bumble Bee Seafoods for US$1.51 billion.
The deal represents the most ambitious acquisition in TUF's history.
TUF president and chief executive Thiraphong Chansiri announces the purchase of California-based Bumble Bee Seafoods for US$1.51 billion. SEKSAN ROJJANAMETAKUN
"The acquisition is part of our goal to improve the gross margin of products to 20% and $8 billion in revenue by 2020," said president and chief executive Thiraphong Chansiri. "This deal will ensure we achieve that goal on time."
California-based Bumble Bee Seafood has annual sales of $1 billion, selling canned, pouched and frozen seafood mainly in the US and Canada.
"Our focus is on high-margin products, so our investment in either new products or companies must reflect our objectives and help to achieve our goals," Mr Thiraphong said.
Bumble Bee products have higher margins than TUF's average, as they are sold in premium markets under widely recognised brands — Bumble Bee, Brunswick, Snow's and Clover Leaf.
When the transaction is completed, TUF's average gross margin will increase to 17-18% from 15-17%.
The deal is set to be completed in the second half of next year, pending approval from US anti-trust authorities and other closing conditions.
"We cannot discuss market share until the transaction is completed since everything remains pending," Mr Thiraphong said.
"On the investment's value, I can say it's in line with the size of the US market.
"In the next 12-24 months, TUF will focus on the integration of our recent investments. We'll maintain financial discipline until we're satisfied before looking for new opportunities."
TUF has been busy with mergers and acquisitions in recent years but especially in 2014 with the purchase of two top foreign seafood companies.
It bought Norway's King Oscar, producer of premium sardines, for $80 million and France's MerAlliance, producer of premium smoked salmon, for $220 million.
"These moves are in line with our strategy of expanding our business size to be compatible with that of a global company," Mr Thiraphong said.
Both acquisitions have allowed TUF to enter premium markets in Europe, Norway, the US, Poland, Belgium and Australia.
Despite the fact that both those companies are now formally part of one of the world's strongest seafood companies, they are relatively small.
Together they cost $300 million, while Bumble Bee alone will go for $1.51 billion.
Mr Thiraphong said Bumble Bee would strengthen TUF's North American operation, particularly in Canada, where TUF has had no presence.
"It will also strengthen our position in the tuna industry and our determination to be the leader in the seafood industry," he said.
Mr Thiraphong said furthermore, Bumble Bee's strength is in its supply chain network.
"Bumble Bee is strong in terms of its supply sourcing, as it can source raw materials and products from around the world on the back of its network," he said.
"This will improve the efficiency of TUF's sourcing management.
"Bumble Bee has one of the best management teams in the tuna industry. So when we combine it with ours, it will even be better."
The company is maintaining this year's sales target of 4 billion baht, while the Bumble Bee acquisition is expected to boost the figure to 5 billion in 2015.
"Next year, we'll focus on developing a strategy for emerging markets in the Middle East, South America and Asean," Mr Thiraphong said.
TUF achieved nine-month sales of 88.6 billion baht, up by 8.1% year-on-year, for a net profit of 4.39 billion, up by 116%.
While Mr Thiraphong is confident in the company's ambitious moves, the market seemed to think otherwise, as TUF shares closed yesterday on the SET at 89 baht, down 3.25 baht, in trade worth 854 million baht.