Billionaire John Fredriksen Calls End to Salmon Rally as Seadrill Struggles

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March 2, 2016

by Mikael Holter

(Bloomberg) — John Fredriksen is calling an end to the salmon rally.

The Norwegian-born oil and shipping tycoon on Tuesday sold a $510 million stake in Marine Harvest ASA, the world’s biggest salmon farmer, cutting his ownership by a third to 17.7 percent. Given that Fredriksen isn’t short of cash to support offshore driller Seadrill Ltd. and other investments pummeled by the collapse in oil prices, the transaction suggests Fredriksen may not see further upside in salmon farming for now, said Janne Kvernland of Nordea Bank AB.

“He probably feels this stock has peaked,” Kvernland said. “It’s not like he doesn’t have the money to support Seadrill without doing this.”

Fredriksen’s wealth has taken a beating in the worst crude market in a generation, falling about 40 percent in the past 18 months to $10.6 billion, according to Bloomberg’s Billionaire Index. In the process, Marine Harvest became his biggest equity holding as the stock last week rose to the highest in more than 12 years amid record salmon prices.

Seadrill, which is struggling with almost $11 billion in debt just as lower spending by oil companies has decimated the rig market, is working on a new funding plan that will be presented in June. That will likely include at least $1 billion in new equity, according to analysts at Nordea and SEB AB.

The participation of Fredriksen, Seadrill’s biggest investor with a 24 percent stake, will be key, Kvernland said. He already showed his willingness to support his companies by joining in a 1.7 billion kroner issue in bulk carrier Golden Ocean Group Ltd., she said.

Cash Pile

Fredriksen has about $5.7 billion in cash and other assets before the latest deal, according to Bloomberg estimates, giving him the resources to participate in the restructuring of Seadrill, which previously helped the billionaire weather a downturn in the tanker market.

A Fredriksen adviser didn’t immediately reply to an e-mail seeking comment. A Seadrill spokesman declined to comment.

Marine Harvest fell as much as 7.2 percent, the most in almost a year, and was down 5.9 percent at 118.6 kroner as of 1 p.m. in Oslo.

The stock has become “very expensive,” said analyst Karl Johan Molnes of Norne Securities AS. While salmon prices are at record levels as supply has been curtailed, farmers are struggling with high costs and need to solve issues like sea-lice outbreaks, he said.

“There’s no upside in this,” Molnes said by phone. “It could be smart for everyone else to sell a third of their Marine Harvest shares.”

Sell Recommendation

Molnes, who said Fredriksen probably tried to offload his entire holding, was the only analyst advising clients to sell the stock before the deal was announced. Danske Bank A/S cut its recommendation to sell from hold Wednesday, leaving 12 buy and three hold recommendations, according to data compiled by Bloomberg.

Fredriksen got involved in salmon farming in the middle of the last decade, at about the same time as he invested in Seadrill, foreseeing a boom in the oil industry. Marine Harvest has proven profitable for the billionaire, who said in 2012 that he got his stake “cheap.”

“He’s made a fantastic investment,” Molnes said.

© 2016 Bloomberg L.P

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