Reykjavik, Iceland-headquartered Iceland Seafood International hf (ISI) has signed a letter of intent to acquire an 80 percent stake in Ahumados Dominguez (ADSA), a salmon processor in Spain.
In 2020, ADSA achieved sales of EUR 19.3 million (USD 23.6 million), alongside earnings before interest, tax, depreciation, and amortization (EBITDA) of EUR 1.7 million (USD 2.1 million), and profit before tax (PBT) of EUR 1.2 million (USD 1.5 million).
Under the terms of the deal, the remaining 20 percent of ADSA will be held by its managing director, Pedro Mestanza, who will continue to lead the company following the acquisition.
ISI said that Ahumados Dominguez is a retail-oriented company with a strong brand and consumer recognition in Spain’s smoked salmon sector.
“The proposed acquisition will strengthen Iceland Seafood’s proposition in the Spanish retail market, as well as creating opportunities to utilize the platform Ahumados Dominguez has for selling high-quality cod products from Iceland,” it said. “By leveraging both the untapped opportunities Ahumados Dominguez has as a standalone company, and the opportunities that a partnership with Iceland Seafood creates, the aim will be to significantly grow sales and profitability in the coming years.”
According to the LOI, the purchase price for the 80 percent stake will be 8.8 times the EBITDA on a debt and cash-free basis.
ISI said that its intention is to finance the acquisition with a combination of debt and equity, with the final financing structure still being worked on. Parties aim to complete the transaction before mid-July.
In a first-quarter 2021 result report, ISI CEO Bjarni Ármannsson said the group believes the two companies can together gain a stronger market presence in whitefish and salmon.
“This will further enhance our overall position in Spain and enable us to draw on expertise we have internally from other markets. Going forward, we aim to see our operating units working closer together than in the past,” Ármannsson said.
In Q1 2021, ISI saw its total sales slip 1 percent year-on-year to EUR 104.4 million (USD 127.5 million). The group achieved a normalized PBT of EUR 3.7 million (USD 4.5 million), climbing from EUR 2.9 million (USD 3.5 million) in Q1 2020.
Its net profit of EUR 2.7 million (USD 3.3 million) was up EUR 800,000 (USD 977,371) on a year previously.
“At Iceland Seafood, we are satisfied with Q1 of 2021. Financially, we had strong contributions from Spain, Argentina, Ireland, being partly offset by ramping up costs in the U.K. Sales and distribution was also strong, primarily driven by Iceland,” Ármannsson said.
Ármannsson said ISI achieved milestones, including the purchase of the acquisition of smoked salmon producer Carr & Sons Seafood, but also faced obstacles in 2020.
“In Ireland, Carr & Sons are a good fit to our Oceanpath operations creating good growth opportunities. We have a strong belief that the U.K. operations will be a good investment. We have a first-class operation for both the retail and foodservice market,” Ármannsson said. “It must be said this has taken more time, been more costly and complex than we anticipated when the initial investment was made, right before COVID-19 broke out. Partly this has to do with the pandemic, Brexit complexities and operational issues and cost with transport of goods from Southeast Asia.”
