Leroey Seafood Group ASA and SalMar ASA may pursue acquisitions next year, while billionaire John Fredriksen’s Marine Harvest ASA, Norway’s largest fish farmer, is limited in what it can do.
Consolidation is “on the cards,” said Roar Husby, chief financial officer of Kverva, Norway-based SalMar, in an interview. “Smaller salmon farmers will use the opportunity now to sell some of their licenses to the bigger players.”
There have been $1.1 billion of fish industry deals announced this year, up from $332 million in 2009, after salmon prices rose to a four-year high in May, according to Bloomberg data. Leroey agreed to take control of Sjoetroll Havbruk AS for $94 million in September, while Morpol ASA, the world’s largest salmon processor, made five purchases in the past year, including buying Norway’s Marine Farms ASA. Carlyle Group’s $190 million purchase of a 13.6 percent stake in China Fishery Group Ltd. is this year’s biggest takeover.
Norway, the world’s largest salmon supplier, has more than 100 salmon companies with almost 1,000 licenses, according to Oslo-based Pareto Securities AS. Marine Harvest, also in Oslo, has 216 standard permits, or about 22 percent of the total.
Marine Harvest filed a complaint last month to the European Free Trade Association, a bloc of four non-European Union countries, over Norwegian rules preventing one company from holding more than 25 percent of all licenses.
“Marine Harvest is the player with the least room for acquisitions,” in Norway, Kolbjoern Giskeoedegaard, an analyst at Nordea Bank AB in Oslo, said in an interview. “Leroey, SalMar, they still have plenty of room.”
Leroey has risen 56 percent in Oslo this year, Marine Harvest 45 percent and SalMar 26 percent, exceeding the 17 percent gain of the 47-company MSCI Norway Small Cap Index. Grieg Seafood ASA rose 80 percent, buoyed by a 41 percent increase in harvested volumes during the first nine months.
“For the larger players, I don’t think they will grow fast enough by just acquiring a license here and there,” said Leif Eriksroed, a fund manager at Alfred Berg Kapitalforvaltning in Oslo, which oversees 3.5 billion kroner in stocks. “I don’t think we will have four large companies here forever.”
Salmon export prices reached a four-year high of 41.78 kroner ($7.21) a kilo on May 23, according to Statistics Norway. The average export price for fresh whole Norwegian salmon climbed 14 percent to 36.15 kroner a ton in the first half, according to Norwegian Seafood Export Council. The price was as low as 23.69 kroner in 2007.
Fish Pool ASA, an exchange for fish and seafood derivative contracts, forecasts salmon prices of 36.80 kroner a kilo next year and 32.90 kroner for 2012. Pareto Securities estimates salmon prices of 33 kroner a kilo in 2011 and 29 kroner in 2012.
Marine Harvest Chief Executive Officer Alf-Helge Aarskog said Nov. 3 the company can expand its existing business in Norway over the next two years and then it will need to make acquisitions. The company is concentrating on fish-health issues in Chile, the second-biggest fish-farming nation, he said.
“In Scotland, the industry is fairly consolidated already, and in Canada, there are only three players,” he said.
The market will be “good” for the next couple of years, said Henning Beltestad, Leroey’s CEO, in a telephone interview. “The value of farming will stay high.”
Takeover targets include Grieg Seafood and Bakkafrost P/F, according to Pareto. SalMar bought 22 percent of Faroe Islands-based Bakkafrost on Oct. 21.
“We could see both a lot of bolt-on or add-on acquisitions, but we also see the potential for several larger acquisitions,” Mikael Clement, an analyst at Pareto, said.
Cermaq ASA, outbid by Morpol in September for Marine Farms, plans to increase its presence in Norway and Chile, said Tore Valderhaug, CEO of the Oslo-based company, in an Oct. 29 interview.
Bakkafrost CEO Regin Jacobsen said the company is more interested in making acquisitions than being bought. Grieg Seafood is “well positioned” for consolidation whether as a target or a purchaser, said CEO Morten Vike.