UPDATE: Jan. 31, 2020: FCF closed on its acquisition of Bumble Bee's North American assets for $928 million.
- Bumble Bee Foods filed for Chapter 11 bankruptcy on Thursday to help with a sale of the company and reduce its debts. Taiwan-based FCF Fishery has already agreed to buy the seafood giant for about $925 million.
- Bumble Bee said it received new financing commitments from existing lenders, giving it sufficient liquidity to fund the business through the closing of the sale within 60 to 90 days. FCF is a stalking horse bidder, the company stated, which means it's the first bid on the assets and sets the minimum amount for which the company could sell. The sale will be a court-supervised auction process.
- "It's been a challenging time for our company but today’s actions allow us to move forward with minimal disruption to our day-to-day operations," Jan Tharp, Bumble Bee's president and CEO, said in the release.
This pending bankruptcy reorganization and sale has been speculated about for months, so it shouldn't come as a surprise. It may be the only way the tuna company can envision advancing from its myriad legal and financial woes.
StarKist and Bumble Bee both pleaded guilty in a tuna price-fixing case in 2017. Bumble Bee received a $25 million fine, while StarKist got the $100 million maximum. Chicken of the Sea was a whistleblower in the federal investigation and wasn't fined. Although the U.S. Justice Department allowed Bumble Bee to pay the fine over the course of five years, that liability — plus related civil lawsuits and less revenues from dwindling sales — had the company considering bankruptcy this summer.
Bumble Bee still owes $17 million to the U.S. Department of Justice, according to its bankruptcy filing. Meanwhile, former CEO Christopher Lischewski pleaded not guilty last year to associated criminal charges, and his trial began in California federal court on Nov. 4, according to Bloomberg.
The tuna industry has been challenged by shifting consumer trends and concerns about overfishing and ocean pollution. Continuing sales declines also continue to pose problems. According to market research firm IRI, tuna sales fell 4% by volume between 2013 and October 2018. Millennials aren't very interested in canned products, and some of them don't even own can openers.
Tuna producers have responded by introducing more convenient pouched products and innovative flavors, but sustainability factors and plant-based competitors — such as Good Catch, Sophie's Kitchen, Ocean Hugger Foods and Atlantic Natural Foods — are making things tougher.
It will take some time to see whether Bumble Bee can adequately resolve its problems through the Chapter 11 bankruptcy reorganization process and a sale of the company. FCF is a privately held global firm founded in 1972 and is Bumble Bee's largest creditor. One of its business lines is trading in frozen tuna for canning and sashimi, so there could be some synergies moving forward between FCF and Bumble Bee.
FCF's bid includes $275 million in cash and $638.5 million in debt, according to CNBC. Even if both parties finalize the sale, the transaction would be subject to whether Bumble Bee receives higher or better offers while in bankruptcy protection. It's possible a higher bid will supplant the purchase agreement with FCF, but given the company's ongoing legal and financial troubles, that may not materialize. London-based private-equity firm Lion Capital bought Bumble Bee in 2010 for $980 million.
On the plus side for companies like Bumble Bee, surveys show consumers still consider seafood a healthier and more sustainable protein choice than meat or poultry. The American Academy of Pediatrics recommends children and pregnant and breastfeeding women eat one to two servings of fish weekly because it provides protein, vitamin D, calcium and omega-3 fatty acids.
Another potential asset is Bumble Bee's status as an iconic brand. Despite all its struggles, the tuna company is a well-known name. Daniel Guyder, a bankruptcy attorney with Allen & Overy, told Bloomberg the prospect of a sale could present "a real opportunity for someone to come in and put many of Bumble Bee’s historic issues in the rear-view mirror."