Pablo Trapunsky, the former chief executive officer of Peruvian fishmeal and fish oil producer Copeinca, said in a recent interview with SeafoodSource that he believes the company is being overvalued by its seller.
China Fishery Group (CFG), part of Pacific Andes International Holdings, owns Copeinca but is being forced to sell the firm, as well as three other companies involved in the Peruvian fishmeal industry, as part of a Chapter 11 bankruptcy proceeding. A federal judge in the United States, where the bankruptcy motion was filed, appointed New York-based financial restructuring and advisory firm Development Specialists, Inc. (DSI) as trustee over Copeinca, DSI President and CEO William J. Brandt, Jr. told SeafoodSource in September that he hoped to recoup as much as USD 1.7 billion (EUR 1.4 billion) from the sale of the four companies.
Trapunsky, who worked at Copeinca for almost 10 years, including six as COO and four years as CEO until he left the company when CFG purchased it in 2013, said DSI’s asking price is far too high.
“It’s quite hard to justify an offer as high as USD 1 billion (EUR 850 million), which trustees are asking for,” he said. “Current price will be around USD 800 million (EUR 680 million). I’m pretty sure creditors won’t be happy to hear that, but this is reality.”
Trapunsky’s reasoning is based on the value of fishmeal and fish oil. When CFG purchased Copeinca, it paid the rough equivalent of around USD 85 million (EUR 72 million) for each percentage point of anchovy quota owned by Copeinca. But that was at the height of demand for fishmeal, when the price per metric ton of the super-prime grade exceeded USD 1,650 (EUR 1,400). Since then, the price has since fallen and stabilized around USD 1,450 (EUR 1,240), Trapunsky said.
“The market situation has changed in past few years. We have seen lately that there are new sources of fishmeal from producing countries that used to be banned due to IUU fishing, and new sources of protein which can be used as fishmeal replacement, as well as many studies about how to reduce inclusion of fishmeal in feed,” Trapunsky said. “However, overall consumption will continue to grow following growth of aquaculture, therefore demand is secured. We’ve also seen some diseases around the aquaculture business that were not there when feed was mainly based on fishmeal and fish oil.”
And el Niño is another huge issue constricting the company’s value, Trapunsky said – one of many factors that, when plugged into financial models, show it’s not feasible to expect anything near the price CFG paid for Copeinca in 2013, Trapunsky said.
“El Niño will happen – it’s not a matter of if, but when. And in any financial model you run, you have to consider that in the mid-term, you may have at least one El Niño that will affect your results,” he said. “Of course, the trustee has to market the operation. But the only way to consider higher prices is to think outside the box, and work following a clear plan to get higher-value products out of the same raw material. If a company can’t do this, it seems quite complicated, no matter who you’re.”
While DSI’s Brandt previously told SeafoodSource that there are 89 parties that have expressed interest in purchasing CFG’s Peruvian assets, Trapunsky estimates there might be no more than a dozen that are seriously considering to bid and at the same time have the capability of raising the funds necessary to complete the purchase.
“I bet you won’t be more than 10 formal bids, at most,” he said. “It’s more likely that buyers come as a partnership,“ he said. “In my opinion, probably the winner of this bidding process will be a company that already is a fishing operator in some part of the world, even in Peru. Maybe they might be able to pay a bit extra if they can be creative and figure out synergies the acquisition would enable. Another option is somebody knowing well the sector. I don’t see a lonely newcomer so far, especially if it’s from the financial market.”
Trapunsky, who has no current ties to Copeinca, said he was aware Netherlands-based Parlevliet and van der Plas (P&P) was a likely buyer. Representatives from P&P recently came to Peru for a due-diligence visit of Copeinca and other CFG assets, Trapunsky said.
“I fully believe they’ve got the means,” he said. “It’s likely they’re going to make an offer.”
He also mentioned the Romero Group, a Peruvian investment group that owns Alicorp and Pesquera Centinela, as well as Peruvian fishmeal and fish oil companies TASA and Enfoca, with interests at Pesquera Diamante, and Norwegian fishmeal, salmon farming, and seafood canning firm Austevoll, as other leading contenders. Austevoll, through its subsidiary in Peru, Austral, could partner with Peruvian fishing and fishmeal firm Exalmar, as it has in previous acquisitions, Trapunsky noted.
Whoever ends up buying Copeinca, a sale is the best possible outcome for it, Trapunsky said, claiming CFG management of the company was poor.
“A lot of former Copeinca workers are still in the company and they’ve struggled quite a bit because of the way the vision for the company changed,” he said. “They’re hoping for a new beginning that may improve things for them and then make the business run better.”
