Norway’s fisheries will consolidate more quickly as smaller companies struggle to meet proposed changes to industry regulations, executives and analysts said.
Norway, the world’s largest salmon supplier, is studying stricter rules on fish farming along its 13,000-mile mainland coast to cut the risk of viruses while allowing industry growth, following a review this year by Peter Gullestad, former director of the country’s Fisheries Directorate. The review recommends a so-called area-management system that splits the sea into zones.
“If the new area-management regime is introduced in Norway, we think that will increase consolidation,” Tore Valderhaug, chief financial officer of fish-farm operator Cermaq ASA (CEQ), said last week in an interview in Oslo. The company is seeking acquisitions at “acceptable prices,” Valderhaug said.
Rising global demand for salmon and a slump in Chilean fish stocks following a virus outbreak fueled gains in prices last year, driving consolidation in the industry. While prices have since fallen back, mergers and acquisitions will be boosted by tougher regulations as smaller fisheries won’t have the means to comply, according to Nordea Markets.
“It has gradually become more and more demanding to be a small producer, having to cope with all kind of regulations and new rules,” said Kolbjoern Giskeoedegaard, an analyst at Nordea in Oslo. “We expect the M&A process would speed up with the implementation of parts of the Gullestad report.”
The report’s recommendations include the division of production areas into zones to coordinate fallowing and restocking of fish, a measure aimed at combating parasites and viruses. A consultation period on the plans, drafted by a panel appointed by the Fisheries Ministry in 2009, ends Aug. 12.
The proposals are “sensible, but there are details that should be modified to adapt it to a practical world,” Giskeoedegaard said.
Deals this year have included Salmar ASA (SALM)’s purchase of Bringsvor Laks AS for $26 million and Bakkafrost P/F’s acquisition of P/F Havsbrun for $213 million. Morpol ASA (MORPOL), the largest salmon processor, made six purchases in the past 12 months, according to data compiled by Bloomberg. It expects to grow in Norway and the U.K., CFO Steven Rafferty said last week.
“We are very active in M&A, so we’ll continue to be so if there is a good opportunity,” Rafferty said.
Chile tightened fisheries regulations, including rules governing fallow periods and distances between farms, after a 2007 outbreak of salmon anemia slashed production.
The prospect of a recovery in fish stocks in the South American country has helped push down salmon prices this year. Export prices for fresh fish fell 5.5 percent to 34.11 kroner ($6.24) a kilogram in the week to June 12, extending a seven- week decline.
A price of about 35 kroner would ensure sustainable growth in the industry, Morpol’s Rafferty said June 9.
“It’s fully possible for a small farmer, who cooperates with other small farmers or bigger ones, to fulfill these obligations,” Gullestad said by telephone. “The time for the small farmer who wants to sit in isolation and do business as before on its own, and doesn’t want to cooperate, is over.”
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