Cooke plans Acquisition of Stolt Sea Farm

A family-owned company in St. George will soon become the largest salmon farmer on the east coast of Canada and the U.S., with the signing of a letter of intent for Cooke Aquaculture Inc. to acquire Stolt Sea Farm's east coast farming and processing assets. Cooke Aquaculture is also eyeing the possible acquisition of the third major player, Heritage Salmon, which has been the largest company. "Heritage is for sale, and we are looking," says Nell Halse, director of communications for Cooke Aquaculture. "It's an option."

With the acquisition of Stolt, Cooke will increase its annual salmon production from about 18,000 metric tonnes to approximately 25,000, or well over half of the total in New Brunswick. The province's annual production is around 40,000 metric tonnes, and the yield in Maine was about 15,000 last year.

Sebastian Belle, executive director of the Maine Aquaculture Association (MAA), believes the proposed acquisition is a positive development for the industry in Maine, since Cooke is a locally owned company that is very competitive. "The new assets make them even more competitive," he adds. "The acquisition of the assets balances Cooke's operations in the U.S., so they can stock in odd and even years in the bay class management system."
Although some may view consolidation in a negative light, Belle points out that, to be competitive in the world marketplace today, a salmon farming company needs to be of a minimum size. "It's a good fit for Maine and New Brunswick," he says. "They have a consistent record of outperforming larger companies."

Impact on jobs

Stolt employs approximately 300 people in its east coast operations, while Cooke employs about 500 on the east coast of Canada and Maine. It is expected that the impact on jobs will be slight. "We want to protect as many jobs as possible," says Halse. "There will some streamlining. There will be some impact on employment, but we hope it will be minimal."

"What is important to remember," says says Glenn Cooke, CEO of Cooke Aquaculture, in a prepared release, "is that our intent is to keep jobs and decision-making in this area. A stronger industry is in everyone's best interest whether they are employees, independent farmers or members of the community."

The MAA's Belle agrees with Cooke's comments. "Based on how Cooke has treated people in the past, it's better Stolt be acquired by Cooke than a multinational company with no connection to the communities," he says.

Last April, Cooke acquired one of the other large Maine salmon-farming companies, Atlantic Salmon of Maine, and shortly afterwards announced it would be closing their processing plant in Machiasport, which had employed up to 50 people at times. With the Stolt acquisition, Cooke will have two processing plants at the industrial park in St. George. Halse says the Machiasport plant will be looked at "as part of the mix." Belle speculates that with acquisition of Stolt, Cooke may have "an increased critical mass" of salmon being raised in the state to consider reopening the Machiasport plant. Noting that the Canadian government offers companies assistance for processing plant investments, he hopes the Maine government will provide an incentive package for Cooke to invest in the plant.
As for which farm sites will be used for raising fish, Halse notes that the acquisition will give the company more flexibility in relocating sites. Cooke will now have to look at the potential for all sites, she says.

The transaction is subject to the completion of the due diligence process, finalized negotiations and board approvals of both companies. The sale is expected to be completed before June 2005.

Losses suffered by Stolt

In recent years, salmon farming companies have had to become more efficient in order to meet challenges that have included low prices, worldwide competition, negative publicity, infectious salmon anemia, superchill and the currency difference between Canada and the U.S. Halse notes that the rising Canadian dollar will cost the company millions. "We'll have to face those challenges now for the new addition and make it profitable as well," she says.
"Stolt Sea Farm has decided it no longer wishes to deal with these risks," says Cooke. "They have offered us the opportunity to acquire their assets and consolidate the east coast industry. This will allow us to apply our corporate strategy to mitigating risks and facing challenges head on."

Salmon farmers have also faced particular challenges in Maine. With new regulatory requirements and U.S. District Judge Gene Carter's court order requiring the fallowing of sites and a ban on non-North American strains of salmon, "companies are questioning whether Maine is open for business for aquaculture," says Halse. "Cooke is now spending a huge amount of time addressing those issues. But Glenn still believes in the potential for Maine."

According to the annual reports of Stolt Sea Farm's parent company, Stolt Nielsen S.A. of Luxembourg, the salmon farming company has suffered significant losses since 2000, referring to some years as "a disaster" and losing $316 million in 2003. Stolt Sea Farm, which was established in Norway in 1972, has farming operations in Norway, Scotland, Spain, Chile, Canada, Australia and the United States.

Stolt Nielsen has been negotiating with the Dutch company Nutreco Holding N.V. to merge the fish-farming operations of the two companies into a joint venture called Marine Harvest, which would be the world's largest aquaculture company. Nutreco would hold a 75% stake and Stolt-Nielsen 25%. On April 13, the European Commission cleared the merger for the company, which will be based in the Netherlands and will control 24% of the world farmed salmon market.

Cooke Aquaculture, though, appears to be thriving on the challenges. According to Halse, Glenn Cooke asked managers last fall to find savings internally, and now employees are bringing forth suggestions for cost-savings.
A local company

Glenn Cooke's family goes back for generations in the Black's Harbour and St. George area. "Glenn and his family are deeply rooted in Charlotte County," says Halse. "They have lived here all their lives and seen the impact when companies leave. They don't want this to happen again."
Cooke Aquaculture was begun 20 years ago with one salmon farm that had 5,000 fish. "The family has put everything they made back into the business," she points out.

"They are looking at ways to strengthen and keeping jobs," says Halse, noting that unlike multinational companies, Cooke's headquarters, where decisions are made, are located in this area.

Although there may be only five truly independent salmon farms in New Brunswick now, Halse says that Glenn Cooke believes that a good mixture of companies creates a healthy diversity. "We want other independents to survive as well."

"We are committed to developing a strong and sustainable salmon farming sector in the region," says Cooke. "This is our home, and we will continue to be a leading employer and important contributor to the province's economy. Stolt has an experienced workforce, productive marine sites, strong processing capabilities, great products and solid customer relationships. These are tremendous assets that will create powerful synergies when integrated into our organization."

Other growth

Cooke has also been eyeing expansion into the growth of other species and has hired an alternative species manager. The company has a farm with two year-classes of cod and a cod nursery in Nova Scotia and is working with scientists in Newfoundland on a broodstock program for cod.

Through its value-added plant in Prince Edward Island, Cooke is exploring new products, including smoked products, patés, mousses, scallops, mussels and pasteurized lobster product. The company also makes its own nets and repairs its cages and has a trucking company, not just for salmon. "It's an effort to make the company fully integrated," says Halse.
Farm sites and other assets.

The New Brunswick Department of Agriculture, Fisheries and Aquaculture lists Stolt Sea Farm as having eight licensed sites in the province, and the Maine Department of Marine Resources lists Stolt as having eight sites, with two presently having salmon and one with cod. According to Halse, Stolt has nine lease sites in New Brunswick and six in Maine, along with a processing plant in St. George, the former Atlantic Salmon of Maine plant in Machiasport and a value-added plant in Stratford, Conn. It also has one hatchery in New Brunswick and one in Maine.

The province lists Cooke as having 18 licensed sites in New Brunswick, and the Maine Department of Marine Resources reports that the company has 13 sites in the state, with four presently having salmon on them. According to Halse, Cooke has 31 lease sites in New Brunswick, Maine and Nova Scotia, with 16 in New Brunswick, 11 in Maine and four in Nova Scotia. Along with a processing plant in St. George, the company has a value-added plant in Charlottetown, P.E.I., six hatcheries in New Brunswick and one in Maine. Among the companies that Cooke operates under in New Brunswick are Kelly Cove Salmon and Jail Island Salmon, which Cooke acquired recently.

The inclusion of contract growers and whether sites are licensed or approved in New Brunswick may be part of the reason for the discrepancies in the numbers of sites each company has.