Thai Union Group Public Company Limited (SET: TU) has announced that on 16 January 2024, the Board of Directors in the Board Meeting No.1/2024 has carefully considered and decided to announce its intention to pursue an exit from the minority investment in Red Lobster Master Holdings, L.P. (Red Lobster), an associated company held by Thai Union Investment North America LLC (TUINA), a subsidiary wholly owned by the company in the United States of America.
The company has been a strategic partner and minority investor in Red Lobster since 2016. During the past years, the combination of Covid-19 pandemic, sustained industry headwinds, higher interest rates and rising material and labor costs have impacted Red Lobster business resulting in prolonged negative financial contributions to the company and its shareholders. In this regard, the company and Red Lobster initiated a review of Red Lobster to identify areas for operational and financial improvement.
After detailed analysis, the Board of Directors has determined that Red Lobster’s ongoing financial requirements no longer align with our capital allocation priorities and therefore the company is pursuing an exit of the minority investment. While the company continues to explore available options for its exit, the company will record a one-time approximate THB 18.5 billion (USD 530 million) non-cash impairment charge in the fourth quarter of 2023.
The Board of Directors considers that the company’s financial statements remain strong, and this one-time non-cash impairment will not cause any material adverse effect on the business operation, assets or financial conditions. However, this transaction impacts the interest coverage ratio and dividend cap restriction which are covenants under a few tranches of bonds previously issued by the company. The company will further seek covenant waivers from bondholders before the company releases its earnings in February.
“The combination of Covid-19 pandemic, sustained industry headwinds, higher interest rates and rising material and labor costs have impacted Red Lobster, resulting in prolonged negative financial contributions to Thai Union and its shareholders,” said Thiraphong Chansiri, Thai Union Group’s CEO. “After detailed analysis, we have determined that Red Lobster’s ongoing financial requirements no longer align with our capital allocation priorities and therefore are pursuing an exit of our minority investment.”
TU recorded a share of loss of THB 0.7 billion (USD 19 million) in the first nine months of 2023 from Red Lobster. While Thai Union continues to explore available options for its exit, TU will record a one-time estimated THB 18.5 billion (USD 530 million) non-cash impairment charge for its whole investment in Red Lobster, which will be included in TU’s fourth quarter 2023 earnings. After impairment, Thai Union’s business and financial position remain strong with a low net debt/equity ratio of 0.84 to prove Thai Union’s strong financial position, the Board has approved a share repurchase for financial management purposes not exceeding THB 3.6 billion or 200 million shares. TU continues to deliver improvements in profitability and gross profit margin across all core business categories. Thai Union is in the process of finalizing its Corporate Strategy 2030, which will focus on its core business, centered around Ambient Seafood, Frozen, and PetCare. Through this, Thai Union’s management will advance ongoing strategies that strengthen its overall profitability and deliver long-term enhanced value for TU’s shareholders.
