Cermaq outlines case for Copeinca acquisition – Fishupdate.com

Cermaq outlines case for Copeinca acquisition Published:  14 May, 2013

A ‘yes’ to Copeinca does not mean a ‘no’ to consolidation, says Cermaq of its bid to acquire the fish feed company in the face of a hostile take-over by fish farming giant Marine Harvest.

“Acquiring Copeinca will yield up to 10 percent productivity improvement for our clients and ensure the correct content of marine Omega-3 in the fish,” say the board of directors at Cermaq. The board is recommending that the shareholders of Cermaq support the proposed transaction with Copeinca ASA at the AGM on May 21.

On Tuesday Cermaq gathered analysts, shareholders, and the press at the company’s research plant in Dirdal (EWOS Innovation) for a comprehensive presentation of the Copeinca transaction. The presentation detailed how the integration of Cermaq and Copeinca, one of the world’s foremost marine ingredient companies, would increase feed quality and productivity.

“The acquisition of Copeinca is both about securing access to a crucial raw material in fish feed, but also about the quality improvement of the end product. Cermaq’s feed operations have over the last seven years reduced the share of marine raw materials by approximately 50 percent. The company will continue to develop fish feed based on alternative raw materials,’ said a statement from the board.

“We have documented that marine proteins are a necessity in high performing salmon feed. Through acquiring Copeinca we will secure a large portion of our Omega-3 demand. At the same time the acquisition will allow us to integrate the two companies’ innovation processes, increasing the quality of fish meal. When we at the same time reduce our costs through improved logistics we will be in a position to capture significant synergies,” said Einar Wathne, COO of Cermaq’s fish feed operations.

The recommended acquisition of Copeinca will generate yearly synergies of NOK 250-270 million. Subtracted financial gains the synergies are estimated at NOK 190-200 million. Approximately 75 percent of the gains will stem from quality improvement and 25 percent from logistics and rationalization.

In 2012, Cermaq’s feed operations sourced raw materials for close to NOK 10 billion. Marine raw materials constituted approximately 30 percent. With such large volumes there are considerable gains to be made by controlling the raw material supply chain.

“We expect logistics and sourcing gains at NOK 50 million and improved feed quality at NOK 150 million per year. In addition the Copeinca acquisition will yield financial consolidation gains of NOK 70 million. However, the most important aspect is that we are taking strategic and operational measures in a central part of our value chain. If we are to retain and strengthen our leadership position in the aquaculture industry this transaction is vital,” said Tore Valderhaug, Chief Financial Officer of Cermaq.

“ We have for a long time publicly stated that we are in favour of further consolidation in the industry, however this requires that price paid to shareholders fully reflects the underlying values and gives all shareholders their share of the synergy gains,” Valderhaug added

“Marine Harvest’s potential offer for Cermaq does not fulfill these requirements. I would encourage our shareholders to keep a cool head and remember that there are other alternative consolidation constellations in the market. We want to continue to develop the company and assess different consolidation solutions. So a ‘yes’ to Copeinca is not a ‘no’ to consolidation, and in our opinion an acquisition of Copeinca would improve the attractiveness of Cermaq in such a strategy,” said Valderhaug.

Marine Harvest has offered NOK 104 per share with a NOK1 shareholders’ dividend.