The $540 million exit of Dartmouth-based Ocean Nutrition has taught us three things: Ocean Nutrition is a really good company; Atlantic Canada has a good ecosystem for young companies; and the knowledge economy in the region has matured in just two years.
ONC announced Friday that its owners, Clearwater Fine Foods and Winnipeg’s Richardson Capital, have sold the maker of fish-oil derived Omega-3 fatty acids to Royal DSM, a Dutch conglomerate involved in health, nutrition and materials. The fact that DSM has annual sales of about C$12 billion means that its massive sales force should be able to accelerate distribution of ONC’s product. Not only will the ONC headquarters remain in Dartmouth, but this larger sales network should help ONC grow and hire more people.
But Ocean Nutrition is already a superb company, as shown by the few metrics revealed in the company’s press release. Sales growth has averaged 20 percent in the past five years. The company expects ebitda (profit excluding interest, taxes and the like) this year to be $55 million to $60 million on sales of $190 million, or a margin of more than 30 per cent.
Corporate takeovers generally take place at about 6 to 8 times ebitda, but DSM is paying at least 9 times ebitda, which means the Dutch company saw something in Ocean Nutrition to command a higher-than-usual price.
One of the reasons this company was so successful is because of the strength of the infrastructure in the province. It started with the foresight of the Risley-MacDonald clan and the excellent management of former CEO Robert Orr. It relied on the universities, which supplied a lot of the brain power. It tapped the financial support of the federal and provincial governments and such agencies as Acoa, NSBI and Innovacorp. This was a case of academia, government and business all pulling in the same direction and accomplishing something tremendous.
This is most likely the fourth nine-figure takeover in the Atlantic region since the start of 2011. Salesforce.com bought Radian6 for $370 million, and IBM bought Q1 Labs for a rumoured $600 million. Buyout firm Birch Hill Equity Partners bought all 10 Secunda Marine offshore supply vessels from McDermott International of Houston for an undisclosed price this year, five years after those same assets changed hands for $270 million.
That means we’re approaching $2 billion in exits in those four deals alone, which is great news for the myriad companies now raising money. Two years ago VC fund managers scoffed at Atlantic Canada because there had never been big exits here. More money is now coming into young companies in Atlantic Canada, and that trickle will increase in part because of these successful exits.
Good company. Good Infrastructure. Maturing business climate. The ONC announcement is great news.