Net Losses: Declaring War on the Menhaden
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With industrialization, the demand for lubricants and liquid fuel soared, a demand at first satisfied mainly by whale oil. But after the 1850s, with whales hunted to scarcity, menhaden became America’s main source of industrial oil. By the mid-1870s, the production of menhaden oil was 50 percent greater than the production of whale oil. More than 400 sailing ships and steamships hunted menhaden up and down the coast from Maine to the Carolinas, chasing schools sometimes 40 miles long. A single haul of a purse seine would often be filled with fish weighing as much as a blue whale. Almost 100 factories extracted the oil and sold the remaining “scrap” or “guano” as fertilizer for nascent agribusiness. The menhaden reduction industry had become a major component of the U.S. economy.
The reduction fishery reached its zenith during the technological frenzy that possessed the nation in the wake of World War II. The tools of war were directed at the little fish, as leftover naval vessels were converted into menhaden ships guided by spotter planes. Locating the schools no longer depended upon a lookout in the crow’s nest of a ship wallowing amid the waves. A spotter plane, canvassing huge areas at high speeds, could quickly spy schools that ships would not have detected. Hall Watters, a former World War II fighter pilot who in 1946 became the first menhaden spotter, recalled how in 1947, flying at 10,000 feet about 15 miles off Cape Hatteras, he spied a school so big that it looked like an island. Another time, Watters spotted a school about “five city blocks in diameter” and “dragging mud in 125 feet of water,” that is, solid from the surface all the way down 125 feet to the seabed. Dozens of boats managed to surround and annihilate the entire school. “I couldn’t believe they could destroy a school that size,” Watters recalled.
The Atlantic menhaden industry was booming. By 1949, National Geographic and Life magazine were saluting it with headlines ballyhooing “Uncle Sam’s Top Commercial Fish” and “Biggest Ocean Harvest.” The catch soared year after year, reaching a peak of 1.6 billion pounds in 1956. But not even the fish’s phenomenal fecundity could sustain them under this industrial onslaught. Menhaden usually spawn far out at sea, and spotters were finding schools as far out as 50 miles, some with so many egg-filled females that the nets would come up slimy with roe. Then, inevitably, the catch began to fall. By 1969, it had plummeted almost 80 percent. Looking back ruefully on the role he and other spotter pilots had played in the demise of the species, Watters (who died in 2004 at age 79) told me, “We are what destroyed the fishery, because the menhaden had no place to hide.”
THE COLLAPSE of the Atlantic menhaden industry allowed one company to gain almost exclusive control of the endangered fishery. In 1953, during the heyday of the Atlantic menhaden industry, George H.W. Bush cofounded Zapata Corporation, a wildcatting oil and gas exploration company headquartered in Houston. After Bush sold his stake in Zapata in 1966, the company began to branch out into fishing in the Gulf of Mexico, “wringing oil out of fish,” as one business journal snidely put it. In the early 1990s, reclusive real estate mogul Malcolm Glazer took control of Zapata, installed his son Avram as president and CEO, sold off the company’s oil and gas interests, purchased the Tampa Bay Buccaneers (forcing the city to impose a sales tax, still in effect, to build a grandiose new stadium), and turned Zapata into a mere shell for a subsidiary with a jazzy new name more fit for a health-food company—Omega Protein.
The Glazers started snapping up the competition like so many menhaden. Most of the eastern seaboard companies, including some founded in the 19th century, were going bankrupt or frantically merging with each other. In 1997, Zapata took over the remaining Atlantic and Gulf competitors, leaving only one small independent in each region. In 1998, Zapata spun off Omega Protein as a separate corporation, although it still owns 58 percent of the company, which is worth a mere $145 million and is Zapata’s only remaining business. In May of that year, the Wall Street Journal noted Zapata’s futile attempts to become a dot-com powerhouse while sneering at the Glazer family’s “fish-oil empire.”
Although not exactly a household name in America (except around Tampa), Glazer has managed to become arguably Britain’s most hated man, reviled almost daily in the British press since last May, when he bought a national icon—the Manchester United soccer team—and turned it into his “corporate toy.” To finance this coup, Glazer assumed a mountain of debt. Last December, Zapata announced that it is trying to sell off Omega Protein, possibly to help service this debt or perhaps to unload the business before its troubles become too obvious.
Image: Courtesy NOAA National Marine Fisheries Service
omega is seen as an agro-play at the stock market. Their stock was highlighted a few times by analysts/commentaries.
My final conclusion is not to buy their shares. Even with rising prices and profits near term.