Alliance Tuna eyes control of NZ food firm

Canned tuna exporter Alliance Tuna International Inc. is planning to acquire a controlling stake in Prime Foods NZ Ltd. , a Hororata, New Zealand based processor of smoked salmon, via an investment of NZD 1.3 million.

The plan, however, is subject to a due diligence review of Prime Foods, whose products are sold under Prime Smoke and Studholme brands.

In a disclosure to the Philippine Stock Exchange (PSE), Alliance Tuna said management was authorized by its board to sign a memorandum of agreement with Prime Foods, which has now established itself as one of New Zealand’s premier gourmet food processing companies, accounting for a 35-percent market share.

Alliance Tuna said such possible investment will be made in two tranches with the first NZD 650,000 invested immediately after a favorable due diigence review is completed which is expected to be late November to mid-December 2008. The second tranche amounting to NZD 500,000 will be made on Jan. 1, 2010. The remaining NZD 150,000 investment will be in the form of a loan to Prime Foods which shall earn an interest at market rate after the first year.

Should the result favor an equity investment, Alliance Tuna must acquire at least 50 percent plus one share of Prime Foods.

Alliance Tuna said the plan also includes the establishment of a joint venture corporation in the Philippines which shall be controlled by the tuna cannery firm. The joint venture corporation which is expected to be operational towards the end of 2009, will export salmon all over the world except New Zealand.

Alliance Tuna said the investment will be paid using internally-generated cash.

“With this investment, Alliance Tuna shall have a controlling ownership interest in a successful brand in the lucrative Oceania market. In addition to salmon, the marketing and distribution network of PFNZ will help Alliance Tuna in selling its canned tuna products in Australia and New Zealand,” Alliance Tuna said.

Alliance Tuna said the investment is expected to boost its profitability since profit margins in salmon are higher than tuna, thereby ensuring future growth for the company.

In 2007, Alliance Tuna registered revenues of $42.4 million, up 36 percent from the previous year’s $31.1 million. The strong sales growth was attributed to the surge in orders from all the major markets, a wider client base and introduction of new products. 

The company shipped 956 full container loads of canned tuna products last year, 107 containers more than the 2006 shipments.

Alliance Tuna is looking at new markets such as Caspian and Kazakhstan to boost sales and expand its global market reach.

The company’s primary export markets are Europe and North America, which account for 84 percent of its total export sales.