Sanford moves to restrict foreign shareholders to protect quotas

Wednesday 14th December 2016

Sanford, the fishing company which counts the Goodfellow family as a cornerstone investor, has asked shareholders to vote for a constitutional change so it can restrict the level of foreign ownership to 22.5 percent to avoid jeopardising its wild catch fishing quota.

The Overseas Investment Act and Fisheries Act restricts foreign investment in fishing quota which is the company’s major asset, worth an estimated $401 million.

Shareholders were told at today’s annual meeting in Auckland that if the rising foreign ownership of Sanford went above the 25 percent foreign ownership limit under the acts, it would be deemed an overseas person and could seriously jeopardise the company’s continued ownership of quota if the company breaching the threshold hadn’t applied for consent with the Overseas Investment Office.

Sanford is the country’s largest fishing company and holds 23 percent of New Zealand’s fishing quota.

It says foreign ownership in the company has increased from around 9 percent a year ago to 17.5 percent and has risen 1.3 percent just since the notice of meeting went out on Nov. 29. The Goodfellows own just over a third of the company through the family investment vehicle, Amalgamated Dairies, currently the biggest shareholder, and the Avalon Investment Trust which sold $25 million of shares to Japan’s biggest seafood company Maruha Nichiro Group earlier this year at the Goodfellow’s request.

Sanford reported a 152 percent increase in net profit this financial year to $34.7 million under a strategy of adding value and developing brands with provenance and has lifted the amount it makes from its wild catch quota and seafood harvest to 51 cents per kilogram from 35 cents last year. The target is to hit $1 per kg.

Chairman Paul Norling said overseas investors are starting to take notice of its progress.

“It’s apparent that the improving performance of the company and the strategy it is now following is of increasing interest to international entities either allied to the seafood industry or investment vehicles that are looking more actively for strategic positions in key food areas such as seafood,” he told shareholders. “It is, therefore, imperative that we address this matter now and take the steps that need to be taken to protect your investment in Sanford from this catastrophic type of risk.”

The current constitution is outdated, he said and offers only limited protection and powers for the board to prevent or remedy a potential breach. The new ownership restrictions allow the board to suspend the voting rights of anyone that causes a breach of the threshold, in a first in last out basis, and require them to sell some or all of their shares.

Other listed New Zealand companies have similar ownership restrictions including Air New Zealand which could lose overseas landing rights if its level of overseas ownership was too high.

The NZX has already given approval for, and a waiver from certain listing rules, to allow Sanford to make the constitutional changes.

The board has set the threshold at 22.5 percent, giving it a 2.5 percent headroom of the statutory limit, but has retained the right to change the percentage including going higher if, for example, it was granted a comprehensive OIO exemption which meant more securities could be overseas owned.

During the year Sanford carried out a detailed risk analysis including the challenges posed by climate change, which is its most significant risk due to the potential impact on the marine environment.

Norling also told shareholders the company was confident of achieving profit growth this financial year, though at lower levels than in 2016. But he said the board wanted to lower borrowings to more prudent levels of 1.7 times ebitda to borrowings, compared to the current 2 times. Norling said "cash is king" and debt had risen slightly through the purchase this year of a new vessel, San Granit, and the board wanted it back to a more conservative level given the industry’s unpredictability.

The company’s share price rose 0.3 percent to $6.70 and has risen 22 percent this year.

BusinessDesk.co.nz

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