As Sea Specialties Inc. sinks into bankruptcy, turnaround firm Meriturn Partners LLC placed a $3.5 million stalking horse bid for one of the seafood processor’s subsidiaries-hoping to bail it out before it, too, goes under. Earlier this month, the San Francisco-based firm announced that it signed a letter of intent to purchase substantially all of the assets of Sea Specialties’ Barnacle Seafood division through a Section 363 bankruptcy sale process.
Sea Specialties’ difficulties began this past spring, when, in March, the Florida Department of Agriculture and Consumer Services discovered the presence of listeria bacteria in a batch of its smoked Atlantic salmon that had been delivered to retail outlets in Alabama, California, Florida, Illinois, Missouri and Pennsylvania.
The salmon recall prompted the Department of Justice to file a civil suit against the company, and in April, Sea Specialties’ operating plants were forced through an injunction to shut down until they complied with terms imposed by the United States Food and Drug Administration. By June, when the plants were allowed to reopen, Sea Specialties lost numerous customers, including major grocery chains and national retailers, according to reports published at the time.
“Sea Specialties knew it needed to go into bankruptcy, and to preserve the value of the subsidiary, it was presumed a stalking horse bid would be beneficial,” said Lee Hansen, a partner at Meriturn. “With a stalking horse named, the customers, suppliers and employees [of Barnacle] would be assured that there would continue to be a reliable business going forward.”
Fort Lauderdale-based Barnacle processes and distributes of a full line of specialty fresh and frozen seafood for the south Florida and Caribbean marketplaces. The company had pro-forma sales of $44 million last year and retains more than 70 employees. Key customers of Barnacle include procurement and logistics company Avendra; cruise lines Holland America and Cunard Lines; and restaurant chains China Grill and Cheesecake Factory.
To get their foot in Banacle’s door, Meriturn had to move quickly. “We conducted our due diligence and submitted our letter of intent in less than a week,” Hansen said. Pending court approval, the deal is scheduled to close by October 10. However, the floor is open for rival bidders to present higher offers.
If Meriturn walks away with Barnacle’s assets, its first goal will be to strengthen confidence in the company’s customers and suppliers in regards to the business’ financial structure. “We’re going to capitalize [the company] well,” Hansen said. “We’ll rebuild the trust of our suppliers by infusing the company with cash so we don’t need trade terms-we’ll pay our suppliers in cash. We will also add more sales people to expand the geographic presence of the business to other large cities in south Florida.”
Barnacle currently serves markets in Miami, Ft. Lauderdale, Fla., and the Caribbean.
Hansen added that Barnacle could also find relief in market trends that are currently blowing at the company’s back. “People are continuing to become more health conscious, and because of that they are eating more fish,” he said. “In 2002, the average consumer ate about 15.6 pounds of fish and shellfish. In 2003, that number went up to 16.3 pounds. This is something we expect to continue.”