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Cermaq ASA (CEQ): The Copeinca acquisition will increase fish feed quality


May 13, 2013 - London

  • A 'yes' to Copeinca does not mean a 'no' to consolidation
     
  • 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.

The Board of Directors of Cermaq recommends that the shareholders of Cermaq support the proposed transaction with Copeinca ASA. Today 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 details how the integration of Cermaq and Copeinca, one of the world's foremost marine ingredient companies, will 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 7 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.

- 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, says 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.

No alternatives to fish oil in the near and medium term

Fish oil is a critical input factor in feed production, securing the salmon's intake of EPA-DHA-fatty-acids (Omega-3). Copeinca's anchoveta quota is among to most attractive in the world and cannot be replaced by discards in the foreseeable future. While production of fish feed has increased considerably, the supply of fish oil has remained constant. There are not enough sources of marine Omega-3 to supply the expected long-term growth in the aquaculture industry. Due to this fact alternative sources of marine Omega-3 are subject to considerable interest and research. However, large scale commercialization of these resources is at least 5-10 years in the making. Hence fish oil will remain a crucial and strategically important resource for Cermaq, where access will be secured by acquiring Copeinca.

Significant financial gains in improving fish meal

Fish meal is an important ingredient in fish feed. The quality varies considerably and greatly affects the growth curve of the salmon. A salmon fed on the highest quality grade fish meal grows twice as fast as a salmon fed on the lowest grade. EWOS Innovation has developed a proprietary measuring method to identify the fish meal's properties so that the quality can be adapted to different markets. Copeinca's raw material, our measuring technique and the integration with Cermaq's production technology and infra-structure is expected to give the combined company a considerable competitive advantage in the aquaculture industry going forward.

Considerable sourcing and efficiency gains

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, says Tore Valderhaug, Chief Financial Officer of Cermaq.

A 'yes' to Copeinca does not mean a 'no' to consolidation

Cermaq has throughout been positive to increased consolidation in the industry. Cermaq has previously pointed to the fact that synergies in the magnitude of NOK 3 billion are not unrealistic, if Marine Harvest should prove successful in acquiring 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. 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, says Tore Valderhaug, CFO of Cermaq.   

For more information regarding the transaction, please contact:

CFO, Tore Valderhaug, cell phone: + 47 99 56 09 25
CEO Jon Hindar, cell phone: + 47 97 74 88 29. 

For more information regarding marine ingredients, please contact:

Executive Director of Cermaq feed production, Einar Wathne, cell phone: +47 958 67 817

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 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 11.8 billion in 2012. Cermaq is listed on the Oslo stock exchange with ticker code CEQ. www.cermaq.com




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Source: Cermaq ASA via Thomson Reuters ONE

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