Corporate Fishing

What’s it take to buy a share of the ocean in America?

For Lion Capital, the British private equity firm, the price is somewhere south of $980 million.

That’s the sum the London-based firm paid three years ago when it bought Bumble Bee Foods, the giant maker of shelf-stable seafood products like canned tuna, a purchase that also included the Bumble Bee subsidiary Snow’s Inc. The popular brand Snow’s is best known for its creamy white clam chowder. It also has another perk: It owns the exclusive rights to fish for 23 percent of the clams that dominate America’s canned clam industry.

Think of it like a hot piece of real estate right off the coast of New Jersey.

Now, every time you sit down to a bowl of clam chowder in America, you’re likely padding profits for British investors. Thanks to the transaction, Lion Capital directly owns about a quarter of the national supply of canned clams, clam soup, chowder and clam sauce.

It’s a scenario that has advocacy groups worried.

“We shouldn’t be issuing control of our fisheries and access to our fisheries away from communities and to multinational corporations. It’s a no-brainer,” said Linda Behnken, the vice chair of the Alaska Sustainable Fisheries Trust, which works to strengthen fishing communities.

Increasingly, however, as the Snow’s deal illustrates, equity groups and corporate actors are stepping in.

National policy makes that much easier than in the past. Since 2010, the National Oceanic and Atmospheric Administration urged the pursuit of “catch shares” to manage fish in America, or a type of management that converts the access rights to fish into private properties. The rights are initially gifted to predetermined groups, typically boat owners and seafood processors with a history in fishing. Then they trade like any other commodity.

The goal is to make fishing more environmentally sustainable. Catch shares cap the number of fish that can be caught. They also reduce or stabilize the number of boats competing for them. They have worked on a variety of fronts: catch share fishing is safer. And because catch shares steady the supply of fish to the consumer, seafood values tend to trend up when they’re applied.

But catch shares have also opened up markets for the sale and lease of access rights to fishing, which, once created, are worth so much money they are susceptible to control by entities with a lot of it, and are tough to acquire by people who actually fish.

Federal law prohibits ownership of fish access for investment purposes. But that law is about as enforced as prohibitions on jaywalking. Foreign acquisition of U.S. fishing rights is also banned by federal law. But, similarly, there’s a loophole: Firms can acquire American-owned corporations or hang a shingle on American soil and qualify for ownership, so long as the C.E.O. of the U.S. corporation is an American, along with most of its board. Such is the case with Snow’s, where a majority of the company’s board and its CEO are U.S. citizens.

In the policy world, there is concern about profit from U.S. natural resources in such scenarios and a loss of control over the food supply. In 2002, there was enough worry that a Senate committee asked government auditors to look at whether foreign companies could take control of U.S. fish – or their value – by buying up access rights. Those auditors quickly sounded the alarm about clams, the first catch share in America, created in 1990.

Despite that alarm, however, there’s been no fix. Instead, the Mid-Atlantic Fishery Management Council, one of eight regional fishery councils that manage fish for the federal government, has spent 12-long years plotting how it will collect data about who controls the clams to guard against monopolies, foreign or otherwise. The council only recently approved a white paper outlining the data it ought to collect. And it isn’t collecting it yet.

This is the arena in which the sale of the clams to Lion Capital went mostly unnoticed. The council doesn’t know who owns what in this fishery. And there are few small fishermen left in the industry now to complain.

Instead, the clam industry is dominated by a small number of industrial processors. And dieting Americans have depressed the market for canned clams and white chowders enough that those few independent owners of fishing rights who remain are focused on getting their clams to market.

But what they lack in glamour, processed clams – too chewy to eat without a lot of boiling, chopping, and tearing into strips – make up for in value. They are a $56 million a year industry.

Zeke Grader, executive director of the Pacific Coast Federation of Fishermen’s Associations, is among those worried about where such seafood revenues land.

“We are setting up the fishing industry for just such a situation where it’s going to be private equity firms basically owning the (rights). Fishermen will be basically like a sharecropper or a tenant farmer fishing these at much lower rates. And a lot of the money is going to be taken directly out of the fishing community and transferred to Wall Street. I think this is a very dangerous condition,” he said.

Indeed, a leasing culture has already sunk deep roots in the fishing industry. In the Alaskan crab industry, for example, made popular by realty TV favorite The Deadliest Catch, fishermen pay as much as 80 percent of their revenue to absentee landlords to go fishing. Still, they shoulder the expenses like fuel, bait, and crew pay and assume all of the risks of fishing.

Most of those landlords, however, are indeed Americans, former boat owners who were the beneficiaries of the resources when that catch share was created in 2005. And they will tell you that everybody makes more money on crab through catch shares, even at lease rates of 80 percent.

Yet there is real concern these landlords will be the last generation of seafarers to actually hold such rights. Thought leaders in some of the oldest catch shares in the nation – in Alaskan halibut, for example, which began in 1995 – are struggling to develop loan programs and cooperatives that give young and mid-career fishermen the ability to acquire their own fishing rights rather than lease them.

Happenings in clam meanwhile may signal what is more likely a future norm: hedge funds and equity firms will take increasing control of the nation’s seafood supply, as is the case with Snow’s.

“This is another example of how fisheries policies are taking their cue from other industrial agriculture’s playbook. The same problems faced by family farmers when industrial agriculture took hold decades ago are now being faced by family fishermen today,” said Brett Tolley, a community organizer and policy advocate for the Gloucester-based Northwest Atlantic Marine Alliance, which has pushed back against more catch shares that privatize the resource. “These policies take away access from small businesses and replace them with large companies and arm chair investors who never set foot on a boat.”
Others industry actors, however, aren’t so worried.

The folks at Bumble Bee Foods rightly point out that the company and its subsidiary Snow’s have been American brands for more than 100 years. And despite their ownership by Lion Capital, they still process their clams in New Jersey. “We pride ourselves of being one of the last U.S. companies that actually process most of our canned seafood in the United States,” Chris Lischewski, the president and CEO of Bumble Bee foods from San Diego, said in an email.

(A version of this piece appeared in Slate.com)