Mr. Ian Smith reports

CLEARWATER SEAFOODS TO ACQUIRE MACDUFF SHELLFISH GROUP, ONE OF EUROPE'S LEADING WILD SHELLFISH COMPANIES

Clearwater Seafoods Inc. has entered into an agreement with the Beaton family and Change Capital Partners, the private equity fund, to acquire 100 per cent of the shares of Macduff Shellfish Group Ltd., the United Kingdom's leading vertically integrated shellfish company, for a purchase price of 94.4 million British pounds plus approximately four million British pounds in seasonal working capital debt for a total of 98.4 million British pounds. In addition, there may be additional consideration paid in the future dependent upon on the future performance of Macduff.

Ian Smith, chief executive officer of Clearwater Seafoods, said: "The acquisition of Macduff brings together two of the world's leading and fastest-growing vertically integrated wild shellfish harvesters. The transaction will allow Clearwater to integrate its vessel management and sustainable harvesting practices, innovative processing technologies along with its global sales, marketing and distribution footprint into Macduff, a company that already possesses a talented local management team, excellent resource assets and a strong presence in the European Union, the world's largest and most valuable seafood market. Our companies have been building a working relationship for more than three years and we are confident Macduff represents a highly attractive investment with a strong strategic fit for Clearwater."

Euan Beaton, president of Macduff Shellfish Group, said: "Having reached our goal of building a 52-million-British-pound business, we had one suitor in mind which shares our vision and values to enable us to accelerate our growth on a global scale. With a similar vertically integrated business model, sustainability at its heart, sound employee practices and strong relationships with fishermen but operating on a much bigger scale, Clearwater is an ideal fit for Macduff.

"This deal is great news for our operations in the United Kingdom, bringing investment and access to new markets within an extremely successful and respected business. It provides learning and development opportunities for our staff as we share best practice with Clearwater and it gives fishermen access to more markets."

Steven Petrow, partner at Change Capital Partners, said: "When we invested in Macduff in 2011 there was a compelling opportunity to transform the business through international expansion and strategic acquisitions. This has been a very successful investment and we are convinced that the next chapter in the company's history will be very exciting."

Transaction overview and rationale

Macduff brings abundant access to additional seafood supply in key markets and channels along with a well-established brand, U.K.-based harvesting and processing expertise, a strong local management team, and a talented work force.

The acquisition of Macduff will significantly enhance Clearwater's scale, and provide opportunities to access additional supply to accelerate the growth of revenues, profit and free cash flow. The transaction:

• Provides access to market-leading supply to attractive complementary species including king and queen scallops, langoustine, brown crab, and whelk;
• Provides Clearwater enhanced access to key distribution channels, including food service and grocery retail, in multiple markets including the U.K., Italy, Spain and Portugal;
• Expands the distribution of Macduff products with Clearwater providing deeper market access as well as sales and marketing strength in North America and Asia, especially Japan and China;
• Expands Clearwater's North Atlantic harvesting operations and provides integrated U.K.-based primary and secondary processing capabilities and expertise with land-based processing facilities in Scotland;
• Creates a new growth platform for Clearwater. Macduff has grown rapidly over the past four years, has identified multiple growth opportunities and is the fishing company best positioned to lead and benefit from future investment.

Financial highlights

For the year ended Sept. 30, 2015, Macduff is expected to generate approximately 52 million British pounds of sales and 9.2 million British pounds of adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) representing annual growth of 13 per cent and 30 per cent, respectively.

In June, 2015, Macduff acquired an additional four scallop trawlers and licences (bringing its fleet to 14 mid-shore scallop harvesting vessels) along with additional preferred procurement access in complementary shellfish species (for instance, whelk). This recent investment along with additional organic growth are projected to help Macduff grow adjusted EBITDA another 25 per cent to 11.5 million British pounds in fiscal 2016. In addition Clearwater has identified further opportunities to invest that will enhance volume, revenue, margins and adjusted EBITDA in 2016 and subsequent years.

Taking into account the 94.4 million British pounds purchase price (which excludes approximately four million British pounds in seasonal working capital debt) and the pro forma 2016 adjusted EBITDA of 11.5 million British pounds, management estimates the effective acquisition multiple on the transaction is approximately 8.2 times adjusted EBITDA. The transaction is expected to be accretive to adjusted EBITDA in 2016 by up to 38 cents per share and adjusted earnings by up to 17 cents per share.

Financing of the transaction

Macduff will be acquired for cash consideration of 71.4 million British pounds, and an unsecured deferred consideration obligation of 27 million British pounds that includes a contingent consideration component.

Clearwater will finance the cash portion of the acquisition from existing loan facilities.

The deferred consideration applies to 33.75 per cent of the shares acquired by Clearwater. The deferred consideration will be paid over the next five or six years.

In each year the holders of the earn-out shares can elect to be paid up to 20 per cent of the total respective earn-out shares. Clearwater will have the right to exercise the payout of 20 per cent of the total earn-out shares annually commencing two years after the date of closing and annually thereafter.

The amount of each deferred consideration payment will be as follows:

The greater of:

1. 5.4 million British pounds;
2. 6.75 per cent of the equity value of the business calculated as 7.5 times the last 12-month adjusted EBITDA less the outstanding debt of Macduff.

Leverage is expected to increase with pro forma leverage of approximately 5.3 times at closing decreasing to below 4.5 times by Dec. 31, 2015, and below four times by Dec. 31, 2016, when Clearwater and Macduff see the full realization of recent investments and organic growth. As a result, management expects to operate above its leverage target of three times with the intention of returning to this goal over the course of two to three years.

Closing of the transaction and other information

Closing of the transaction is subject to customary conditions and is scheduled for Oct. 30, 2015.

There are no pending regulatory approvals.

Conference call

Clearwater will hold a conference call for analysts and investors today (Oct. 9, 2015) at 1 p.m. Eastern Daylight Time to discuss this announcement in further detail. To join this conference call, within Nova Scotia dial 902-455-3592 and within North America dial 888-231-8191. To join this conference call from within the United Kingdom dial 0-800-051-7107.

Presentation slides for the conference call are available on the company's website.

To ensure your participation, please dial in five minutes prior to the scheduled start of the call. You will be required to identify yourself and the organization on which behalf you are participating.

If you cannot participate in the live mode, a replay will be available until Jan. 8, 2016. To access the replay, please dial 855-859-2056 and enter pass code 55503728.

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