The local political situation in Peru is complicating the sale of China Fishery Group’s Peruvian assets, according to William A. Brandt Jr., the court-appointed trustee overseeing the process. Nonetheless, Brandt still expects to receive an offer within the next 45 to 60 days.
In an interview with SeafoodSource, Brandt, the president of management consultant and financial advisory services firm Development Specialists, Inc., said he is having “a little tougher time than many of us expected” in selling the assets, which include CFG Peru Singapore, the owner of 16 percent of the anchoveta fishing quota in Peru, in addition to 17 fishmeal processing plants in Peru and more than 50 fishing vessels catching anchovy, mackerel, and jack mackerel.
Brandt had been seeking as much as USD 1.7 billion (EUR 1.4 billion) for the properties, but delayed a planned auction in December 2017, calling the initial sale timeline “aspirational.”
Speaking with SeafoodSource on 2 July, Brandt said the ongoing political turmoil brought on by the corruption scandal surrounding former Peruvian President Pedro Pablo Kuczynski – and his resignation in March 2018 – had complicated the sale.
“I don’t discount the argument that political turmoil that’s been raging in Peru since December has given [buyers] pause,” he said. “If I was going to spend a billion dollars in Peru, with the wholesale changes in government going on there that might affect tax policy and so many other things, I might want to know what was in store there.”
Nevertheless, he said, a handful of buyers still pursuing active due diligence, which is likely to culminate in an offer within two months. Brandt declined to name the companies pursuing the purchase, but he said there is serious interest from multiple companies each from Asia, Europe, South America, and North America.
“There’s a real collection of companies from all over the world,” he said. “It’s spirited, with several different industry types involved – everybody does realize this is a big sale because it involves the largest quota in Peru. This is a once-in-a-generation thing, and if it falls into the hands of major player, it could be the most attractive and profitable fishing company in Peru.”
Eight to nine companies signed non-disclosure agreements allowing them to do a more thorough investigation of CFG Peru’s assets, and “about half of those moving quicker along than the others,” Brant said.
“That’s not unusual for a process like this,” he said. “In my own mind, I have them handicapped and I have own opinion of who’s in the lead.”
Brandt said besides the political strife in Peru, the sale process had also been slowed by the complex organizational structure of the Pacific Andes umbrella of companies.
“They designed a system that could not easily be taken apart, for their own purposes,” he said. “As we got into it, there were tripwires we needed to get over.”
The biggest of those tripwires were a large number of intercompany claims of money owed by CFG Peru, including USD 459 million (EUR 376.5 million) owed by one of the Peruvian subsidiaries to China Fishery International Limited. Those debts had discouraged potential buyers from moving forward, and in March 2018 ruling, Brandt asked U.S. District Court Judge James Garrity, the adjudicator of the Chapter 11 filing of Pacific Andes, for permission to bundle all intercompany claims owed by the CFG Peru subsidiaries into one main claim. Garrity approved that motion on 14 March.
“The intercompany claims stipulation was a major undertaking and a strong cooperative effort between Pacific Andes and the Ng family,” Brandt said. “We performed true, methodical due diligence, and with the intercompany claims settlement, we have gotten through biggest hurdle.”
The agreement “clarified a starting point for the price,” Brandt said – the netting is voided if the CFG Peru assets are sold for less than USD 980 million (EUR 803.6 million) by 30 June, 2018. But Brandt said he believes the price eventually paid for PNG Peru Singapore will be higher, given the “exceptional” fishing season that Peru experienced this spring.
“My thinking at the current time is that people are doing their due diligence. We’ll see their reaction to fishing season. The question is, does it get bid up? I’m thinking so. We’re on the cusp of another five to six year run of magnificence in the industry, so I think a lot of folks who would have sat on the bench a little longer now see their hand is more forced because other buyers coming in,” he said. “They might think, ‘If I had another couple of months, I would like to see how politics play out, but our hand is being forced’ by the profits coming in from the spectacular fishing season.”
If and when Brandt gets an offer, he is required to pass it through Garrity and receive the court’s approval. At that point, any company that is interested in making a higher bid can place an objection. At that point, the judge can allow for a series of higher bids, creating an auction-like scenario.
One factor Brandt said he believed has not played a role in scaring away buyers are the dual lawsuits both he and Pacific Andes have filed against HSBC. While Brandt acknowledged to SeafoodSource other banks could still be added to his lawsuit, he said that would not create an issue for any of the potential buyers.
“I think it’s an apples and oranges situation,” he said. “All the folks looking at this deal are fully capable of doing it without being dependent on commercial banks per se.”
