High Liner Foods

- Acquisition Results in High Liner Foods Becoming the Leading Value-Added Seafood Supplier in North America -

LUNENBURG, NS, Nov. 17, 2011 /CNW/ - High Liner Foods Incorporated (TSX: HLF; HLF.A), a leading North American value-added frozen seafood company, today announced that it has reached an agreement to acquire the U.S. subsidiary ("Icelandic USA") and Asian procurement operations of Icelandic Group h.f., one of the largest suppliers of value-added seafood to the U.S. food service market. The transaction is valued at approximately US$230.6 million. Completion of the transaction, which is subject to customary closing conditions, including regulatory approvals, is expected in late 2011 or during the first quarter of 2012.

"We are very pleased to have reached this agreement, which will make High Liner Foods the leading value-added seafood supplier in North America," said Henry Demone, President and CEO of High Liner Foods. "Icelandic USA is an established leader in the U.S. food service market and is managed by an outstanding team. The operation will be a good fit with High Liner's U.S. operations and allow us to address a larger, consolidated customer base through stronger purchasing power. The combination provides High Liner a more efficient supply chain with stronger product development capabilities. The transaction is expected to strengthen our industry leadership position and create incremental value for our shareholders."

The acquisition includes Icelandic USA's processing plant in Newport News, Virginia, as well as subsidiaries that operate a processing plant in China and procure product from other Asian countries.  High Liner is acquiring several brands in connection with the acquisition. In addition, High Liner has agreed to a seven-year royalty-free licensing agreement with Icelandic Group for the use of the Icelandic Seafood™ brand in the United States, Canada, and Mexico. High Liner has also structured a long-term distribution agreement with Icelandic Group that will ensure that producers in Iceland will continue to have the same access to the U.S. market as they do today and that High Liner will continue to be able to supply its customers with high-quality fillets from Iceland under the Icelandic Seafood™ brand.

"We look forward to building a long-term working relationship with Icelandic Group and the Icelandic seafood suppliers that benefits both our respective operations and stakeholders," added Mr. Demone.

Icelandic USA has a long history of providing high-quality seafood in popular forms, such as battered and breaded products as well as a full line of premium fillets.  For the last 12 months ending September 2011, Icelandic Group's U.S. and Asian operations recorded sales of US$268 million and pro forma adjusted earnings before interest, taxes, depreciation and amortization (pro forma Adjusted EBITDA) of approximately US$29 million, after taking into account the full year of savings from the investment in a new cold storage facility at Icelandic USA's plant that opened in 2011.

High Liner expects the acquisition to be paid in cash at closing of the transaction, subject to net working capital adjustments. The transaction will be financed with new long-term debt and an increase in High Liner's existing asset-based loan facility. High Liner has engaged RBC Capital Markets and BMO Capital Markets to lead the issuance of a US$250-million term loan. Proceeds will be used to repay existing term loan indebtedness of approximately US$47 million, including pre-payment fees, with the remainder being used to fund the acquisition and transaction costs of US$20 million. The majority of the synergies are expected to be achieved during calendar 2012 and 2013. High Liner expects near-term synergies of US$12.1 million and total ongoing annual synergies to be in the range of US$16-18 million. Leverage would be reduced to approximately 3.8x on a pro forma basis adjusted for the expected near-term synergies and seasonal debt levels.

High Liner expects the acquisition to be immediately accretive to earnings per share before one-time costs related to the acquisition.  On a pro forma basis, High Liner's annual revenue would be approximately $900 million for the last 12 months ending September 2011 with pro forma Adjusted EBITDA of approximately $94 million including near-term synergies.

RBC Capital Markets and Markó Partners are acting as financial advisors to High Liner with respect to the acquisition, and Goodwin Procter LLP is providing legal advice.

Notice of Conference Call

Management of High Liner Foods will host a conference call today, Thursday, November 17, 2011 at 2:45 pm (ET) to discuss the acquisition. To join the call, please dial 647-427-7450 or 1-888-231-8191. A taped replay of the conference call will be available until Thursday, November 24, 2011 at midnight by calling 416-849-0833 or 1-855-859-2056, reference number 29659743.

A live audio webcast of the conference call will be also available at www.highlinerfoods.com.  Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download or registration that may be required to join the webcast.  The webcast will be archived at the above website for one year.

About High Liner Foods Incorporated

High Liner Foods Incorporated is a leading North American processor and marketer of prepared, value-added frozen seafood.  High Liner's branded products are sold throughout the United States, Canada and Mexico under the High Liner^®, Fisher Boy^®, Mirabel^®, Sea Cuisine™ and Royal Sea^® labels, and are available in most grocery and club stores.  The Company also sells its High Liner^®, FPI^®, Mirabel^®, and Viking™ food service products to restaurants and institutions, and is a major supplier of private label seafood products to North American food retailers and food service distributors.  High Liner Foods is a publicly traded Canadian company, trading under the symbols HLF and HLF.A on the Toronto Stock Exchange.

About Icelandic Group h.f.

Icelandic Group is an international company, based in Reykjavik, Iceland, with a rich history that spans 70 years in Icelandic Fisheries. It has grown and strengthened throughout the years and is now a network of independent manufacturers and marketing companies, each operating in its own market in America, Europe and Asia. 

This document contains forward-looking statements. Forward-looking statements can generally be identified by the use of the conditional tense, the words "may", "should", "would", "believe", "plan", "expect", "intend", "anticipate", "estimate", "foresee", "objective" or "continue" or the negative of these terms or variations of them or words and expressions of similar nature. Specific forward-looking statements in this document include, but are not limited to expectations with respect to: the transaction receiving regulatory approval; becoming the leading value-added seafood company in North America; achieving supply chain efficiencies; enhanced product lines and product development capabilities; improved economies of scale; increasing value to shareholders; leverage; achieving synergies of $16 to $18 million and the timing of any synergies; financing and use of proceeds; and the acquisition being immediately accretive to earnings per share. These statements are based on a number of factors and assumptions including, but not limited to: obtaining regulatory approval; our ability to integrate the acquisition into our operations; achieving the expected synergies and supply chain efficiencies; financing market conditions; and, acceptance of new products in the marketplace. The statements are not a guarantee of future performance.  By their nature, forward-looking statements involve uncertainties and risks that the forecasts and targets will not be achieved.  Readers are cautioned not to place undue reliance on forward-looking statements, as actual results may differ materially from those expressed in such forward-looking statements.  We include in publicly available documents filed from time to time with securities commissions and the Toronto Stock Exchange, a discussion of the risk factors that can cause anticipated outcomes to differ from actual outcomes.  Except as required under applicable securities legislation, we do not undertake to update forward-looking statements, whether written or oral, that may be made from time to time by us or on our behalf, whether as a result of new information, future events or otherwise.

The Company reports its financial results in accordance with IFRS. Included in this media release is a non-IFRS financial measure, Adjusted EBITDA, as a supplemental indicator of operating performance.

The Company believes this non-IFRS financial measure provides useful information to both management and investors in measuring the financial performance and financial condition of the Company. This measure does not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similarly titled measures presented by other publicly traded companies, nor should it be construed as an alternative to other financial measures determined in accordance with IFRS.

For further information about the Company, please visit our website at www.highlinerfoods.com or send an e-mail to investor@highlinerfoods.com.

 

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