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Cermaq ASA : Cermaq acquires the Chilean company Cultivos Marinos Chiloé

October 1, 2012 - London

Cermaq ASA has entered into an agreement to acquire all shares in the Chilean farming company Cultivos Marinos Chiloé S.A (CMCh) for a total enterprise value of USD 110 million. The transaction will increase Cermaq's total production capacity by almost 25 percent to approximately 180,000 tonnes. The transaction strenghtens the group's production capacity in Chile and the share of value added products.

As a consequence of lower prices and increased production, CMCh has over the last year faced a challenging financial situation. The shareholders have therefore considered different solutions to secure the future development of the company, which has led to discussions and finally the agreement with Cermaq.

«The acquisition of Cultivos Marinos Chiloé is important to support Cermaq's growth ambitions in Chile», says Cermaq's CEO Jon Hindar in a comment. «We currently observe a challenging market for most farming companies, but we are convinced that a continued increase in the global demand for salmon will strengthen the industry's profitability. The access to more capacity in one of the most interesting global salmon areas is therefore of the utmost importance for Cermaq", Mr Hindar continues.

«This transaction contributes to secure control over more production areas and will over time reduce the group's biological risk and total cost", Mr Hindar continues. «Even if EWOS already is the company's main supplier of feed, the transaction secures the sales volume going forward as well as reduces the capital employed and credit risk related to this customer», Mr. Hindar concludes.

Summary of the transaction

  • Cermaq acquires all shares in CMCh with an expected closing Friday 5th October 2012.
  • The transaction increases Cermaq's production capacity by around 32,000 tonnes (gwe) on a normalized basis. Expected sales for 2012 amount to 32,000 tonnes while the volume will fall to 23,000 tonnes in 2013 before increasing again from 2014.
  • Total sales proceeds reflect an enterprise value of USD 110 mill allocated between shares and repayment of loans, including the company's bank debt.
  • The transaction will be funded by drawings on Cermaq's current credit facilities.
  • As a result of the acquisition of CMCh, Cermaq's total production capacity within salmon farming will increase to almost 180,000 tonnes. Because the majority of CMCh's production in 2012 of approximately 32,000 tonnes (gwe) is sold as value added products, Cermaq's position within this part of the value chain in Chile will be significantly strengthened.
  • EWOS is already CMCh's largest supplier of feed. The transaction will therefore not have significant effects for the Feed business unit, except to secure future volumes, reduce credit risk and generally improve capital employed.

The transaction
Cermaq acquires all shares in CMCh from Inversiones Tocoihue Limitada, Inversiones Metahue S.A. and Inversiones y Asesorías e Inversiones Pualo Limitada. In addition the transaction includes acquisition of minority equity interests held by Inversiones Coipue Limitada and Inversiones Metahue S.A. in CMCh's subsidiaries Alimentos Marinos Chiloé S.A., Pesquera Popetán Limitada and Productos Marinos Mardim Limitada. The transaction also includes certain assets held directly by Mr. Francisco José Lopez Herrera.

  • Total sales proceeds reflect an enterprise value of USD 110 mill allocated between shares and payment of loans, including the company's bank debt. Payment of the shares and loans, adjusted for a withheld payment of USD 4 mill, in total USD 106 mill (approximately NOK 615 mill) will be made on or shortly after the closing date, which at the latest will be 5th October 2012.
  • The company will be included in Cermaq's accounts as from fourth quarter 2012.
  • The total proceeds of shares and loans will be financed by current credit facilities in Cermaq provided by the group's relationship banks.
  • There are no other conditions or requirements for approvals from any authorities or other stakeholders.
  • Apart from any payment of the withhold proceeds of USD 4 mill, there are no agreements in favor of CMCh or Cermaq group's leading employees or board members as a result of this transaction.

Description of Cultivos Marinos Chiloé S.A (CMCh)

  • CMCh is a medium sized farming company with production activity in region Los Lagos and Aysén. The company has further 12 own smolt facilities and two processing plants with value added product capacity. Out of the total production in CMCh, value added products account for more than 90 percent, including smoked salmon that accounts for around 16 percent of total production.
  • The company's farming capacity is in the range of 32,000 tonnes per year (gwe). In 2011 the company sold 15,400 tonnes, while sales of around 32,000 tonnes are expected for 2012. Total sales in 1st half 2012 were approximately 12,200 tonnes.
  • Companies controlled by Mr. José Lopez have until closing of this transaction owned 95 percent of CMCh while the current managing director, Mr. Ricardo Purcell, has owned the remaining shares.
  • CMCh controls a total of 29 licenses, out of which 20 in region Los Lagos (X) and nine in region Aysén (XI). Except for six licenses that are rented from other companies, the remaining licenses are owned by the company.
  • In addition to the existing production, CMCh has applied for four new licenses in region XI and 58 licenses in region XII. There is no knowledge as to if and when such applications may be approved.
  • By the end of second quarter 2012 there are approximately 1,500 employees in CMCh, out of which around 50 percent within the company's processing and value added product plants.
  • The company is today headed by Managing director Mr. Ricardo Purcell and a management team of five persons.
  • The main shareholder, Mr. José Lopez, has until the closing of the transaction with Cermaq been the Chairman of the Board of Directors in CMCh.

Financial key figures for CMCh

 USD 1,000 2009  2010   2011          1H 2012 1H 2011
Revenues 70 542 80 363 104 279 65 592 35 557
EBIT pre fair value (26 840) 10 055 16 199 (3 126) 6 396
Volume (gwe) tonnes 14 645 12 764 15 377 12 188                 5 137
EBIT pre fair value/Kg (USD) (1,83) 0,79 1,05  (0,26) 1,25
Profit Before Tax (35 564) 10 876 9 619 (10 431) 4 618
Net Profit (32 217) 8 716 8 550 (8 734) 350
Total Assets 138 370 185 039 219 402 228 551 201 594
Liabilities 140 840 160 085 178 883 196 643 169 271
Equity (2 470) 24 954 40 519 31 908 32 323

Impact of the transaction for Cermaq
Cermaq's production capacity in Chile will, following the transaction, increase by almost 50 percent and strengthen Mainstream Chile's ability to control neighborhoods where the company is present. The group will be operating in three new neighborhoods, out of which two will be fully controlled by the combined entity. Balancing the company's operations between all three regions and control of neighborhoods is one of the four cornerstones in Cermaq's strategy for sustainable farming operations in Chile.

The transaction will increase the group's activity within value added processing as 92 percent of CMChs production is supplied as portions, filets and smoked salmon to the group's customers. This will support Mainstream's strategy to increase the business area's product flexibility.

The transaction is expected to provide a number of synergies in the combined farming operations in Chile through increased value added processing, improved capacity utilization and by combining administrative functions. Further information about estimated synergy potential may be announced at a later stage.

Apart from the above overview of financial key figures in CMCh, further information as to the impact of the acquisition on Cermaq's total assets and liabilities will be provided as part of the group's presentation of its third quarter 2012 results.

Other information
The transaction will be closed 5th October 2012 at the latest. CMCh will be included as an integrated part of Cermaq's farming operations in Chile as from fourth quarter 2012.

Legal advisor for Cermaq has been the Chilean law firm Ovalle y Cía. Apart from assistance in the due diligence process, no financial advisor has been engaged by Cermaq to assist with the transaction.

Contact persons
Chief Executive Officer, Mr. Jon Hindar
Telephone: +47 23 68 50 11; +47 97 74 88 29

Chief Financial Officer, Mr. Tore Valderhaug
Telephone: +47 23 68 50 38; +47 99 56 09 25

About Cermaq - Cermaq is an international group of companies with activities in fish farming, production of salmonid feed and research in aquaculture. Cermaq has operations in Norway, Chile, Canada, and Scotland, the main geographic regions for salmon and trout farming, and in Vietnam. Through its business unit EWOS, Cermaq ranks as the world's second largest producer of feed for salmonids. The business unit Mainstream is one of the world's leading farming companies of salmon and trout. The group had sales of around NOK 11.6 billion in 2011. Cermaq is listed on the Oslo stock exchange with ticker code CEQ.

This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.

This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients.

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(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.

Source: Cermaq ASA via Thomson Reuters ONE



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