October 10, 2012
Cermaq ASA is to acquire all shares in the Chilean farming company Cultivos Marinos Chiloé S.A (CMCh) for US$110 million.
The acquisition will increase Cermaq's total production capacity by almost 25% to approximately 180,000 tonnes. The transaction strengthens 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 faced a challenging financial situation over the last year. 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", Hindar continues.
Cermaq acquires all shares in CMCh with an expected closing Friday October 5, 2012. The transaction increases Cermaq's production capacity by around 32,000 tonnes on a normalised 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 US$110 million 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 is sold as value added products, Cermaq's position within this part of the value chain in Chile will be significantly strengthened.
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%, including smoked salmon that accounts for around 16% of total production.
Cermaq's production capacity in Chile will, following the transaction, increase by almost 50% and strengthen Mainstream Chile's ability to control neighbourhoods where the company is present. The group will be operating in three new neighbourhoods, out of which two will be fully controlled by the combined entity. Balancing the company's operations between all three regions and control of neighbourhoods is one of the four cornerstones in its strategy for sustainable farming operations in Chile.
The transaction will increase the group's activity within value added processing as 92% 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 also expected to provide a number of synergies in the combined farming operations in Chile through increased value added processing, improved capacity utilisation and by combining administrative functions.
