Cooke Buys Marine Harvest UK Salmon Farms

Cooke buys Marine Harvest UK salmon farms for $225M

March 27, 2014, 7:15 am
Undercurrent News    

Marine Harvest has signed an agreement to divest its up-for-grabs UK integrated farming operations on the Shetland and Orkney Islands to Cooke Aquaculture, the Canadian farming group.

The operations have a combined harvest volume of 17,400 gross weight for 2014, which gives Cooke, founded by entrepreneur and CEO Glenn Cooke (pictured), a strong foothold in a new country.

The agreed enterprise value (ev) is £122.5 million, which corresponds to an ev/kg of approximately NOK 70. Closing of the transaction is expected in the second quarter.

“This purchase gives us a unique platform for our European operations and is a good fit with our Spanish sea bass and sea bream farming company, Culmarex. We will be able to leverage our global relationships with suppliers and build on Meridian’s excellent market reach into both the European and US marketplace,” said Cooke, in a statement.

Meridian Salmon Farms, the name of the former Morpol division, generated revenues in 2013 of CAD151.3m and earnings before interest, taxes, depreciation and amortization (ebitda) of CAD 44.3m, Cooke said.

“The company is highly profitable and expects a significant ebitda increase going forward. This will be driven by an increased sales price per kg that will be achieved when it is operated as an independent company. Meridian is also a cost effective producer with a dedicated management team and employee base. There are many similarities between our corporate cultures and the pristine natural environments and high environmental standard of our farming operations.”

The divestment is a consequence of the remedies set forth by the European Commission for the approval of the Morpol transaction in September 2013.

The Commission required Marine Harvest to divest farming capacity on the Shetland and Orkney Islands. The agreement is conditional on the Commission approving that the purchaser and the transaction as well as the sales terms satisfy these remedies.

The majority of the assets included in the transaction have been booked as assets held for sale and Marine Harvest’s volumes guidance will not be affected by the transaction.

Based on the year end 2013 balance sheet, anticipated gain on the sale is approximately NOK 300 million. Final gain is to be determined upon completion of the transaction.

A completion of the sale is likely to increase the potential dividend capacity for Q1. The final Q1 dividend will be decided by the board in connection with the Q1 result announcement planned for April 30.

Cooke was advised in this purchase by Markó Partners, a research and corporate finance boutique focusing on the seafood industry. Stewart McKelvey acted as general counsel and Thommessen acted as local counsel.

Arctic Securities has acted as financial advisor and Wiersholm and Brodies have acted as legal advisors in the transaction.

Cooke, which has its with a head office in Black’s Harbour New Brunswick and North American salmon farming operations in Atlantic Canada and Maine, also owns Salmones Cupquelan, a salmon farming company in southern Chile and Culmarex, a sea bass and sea bream farming company in southern Spain.

Following the Meridian acquisition, Cooke will have close to CAD 1 billion in turnover and 2,500 employees, states a press release.

New entry to UK

The acquisitive Cooke was not even listed by analysts in October as a prospective buyer, with the Leroy Seafood Group and Salmar joint venture, Norskott Havbruk, the parent of Scottish Sea Farms, seen as the favourite.

Because of the synergies with its existing operations, Norskott was seen as the most likely candidate. Dawnfresh Seafood

Analysts were below on the estimated deal value, with a level of NOK 1 billion (£99.74m), a third of the price it paid in buying Morpol, given as an estimate.

Kolbjorn Giskeodegard, an analyst with Nordea, valued the Orkney operations at an enterprise value per kilo (ev/kg) of under NOK 50 (€6.2/ $8.3), while those in the Shetlands were estimated at NOK 55 – 60 ev/kg, depending on bidding competition.

As a comparison, earlier in 2013 Salmar bought shares in Villa at an ev/kg of NOK 48, and Leroy got its shares in Villa at an ev/kg of NOK 52.

Cooke has already expanded outside of salmon farming in North America with a presence in Chile, where it was trying to increase its exposure through buying Invermar, a deal that fell through.

It has acquired farming assets in Spain to become the largest producer. In February 2013, it added to this element of its business with a deal for Doramenor, from Ricardo Fuentes e Hijos.

The acquisition – which follows months of negotiations, as previously reported — doubled Cooke’s bass and bream output from when it first started in Spain.

It will also make it the world’s fifth largest producer of bass and bream, Nell Halse, spokesperson at Cooke, told Undercurrent News.

The deal took Cooke’s salmon production to around 15,000t in 2013, up from 9,000t in 2012, Halse said.

Cooke first obtained a foothold in Spain in 2012 when it acquired Culmarex from Polish processor Morpol.