TU nets 25% Red Lobster stake
Diversifying risks with restaurant investment
SET-listed Thai Union Group Plc (TU), the world's biggest producer of canned tuna, has bought a 25% share of Red Lobster Seafood Co from Golden Gate Capital, says TU president and chief executive Thiraphong Chansiri.
He said the deal is worth US$575 million. Red Lobster is the world's largest seafood restaurant chain with 700 branches in the US, Europe and Japan.
"TU wants to diversify into the restaurant sector and this acquisition will help expand our market share in America," Mr Thiraphong said.
"We chose Red Lobster as it has strong experience in the field and we want to learn from it."
After TU's 25% acquisition, Golden Gate Capital remains a major shareholder of Red Lobster, he said, adding that the company has no plans to wholly own the restaurant chain.
TU plans to invest further in other businesses to diversify risks.
Mr Thiraphong said TU has been supplying seafood products to Red Lobster for more than 20 years. The company will continue supplying its products, especially those with a higher value, in the future.
TU on average sold $65 million a year in products to Red Lobster, while the restaurant chain generated $2.4 billion a year in revenue from food sales.
To acquire the minority share, TU borrowed $575 million from three local banks: Bangkok Bank, Siam Commercial Bank and Bank of Ayudhya.
The company is looking to pay off the bridging loans by issuing a 13-billion-baht debenture, with the additional sum being used to finance future investment and business expansion, said Mr Thiraphong.
TU is also considering investing 1 billion baht in a second research and development house focused on animal nutrition, creating added value for seafood products.
The plan is expected to be finalised by the end of this year, with operations to start by 2018.
In August, TU acquired a majority stake in Canadian lobster processor Les Pecheries de Chez-Nous in a bid to boost its customer base in North America. The company is looking at more acquisitions after scrapping a $1.5-billion deal to buy US-based Bumble Bee Seafoods in December 2015.
Mr Thiraphong said TU aims to invest around 3.5-4 billion baht annually, excluding mergers and acquisitions (M&A).
Through its expansion and investment strategy, the company expects total revenue this year to meet its $4.5 billion revenue target he said, adding that figure is expected to reach $8 billion by 2020.
The company is focused on organic growth, its three new business units and revenue from new M&As. This year it targets revenue of $1.5 billion from organic growth, $1.2 billion from its new business units and $1.5 billion from new M&As.
TU posted a 17% year-on-year rise in second-quarter net profit, crediting record sales at a time when it has managed to cut financial costs.
TU shares closed yesterday on the Stock Exchange of Thailand at 20.70 baht, unchanged, in trade worth 515 million baht.