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Marine Harvest Buys Chilean Salmon Farms, Boosts Access to Russia

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September 15, 2014

A fish farm on the west coast of Norway

By Mikael Holter

Sept. 15 (Bloomberg) — Marine Harvest ASA, the world’s biggest salmon producer, bought farming assets from bankrupt Acuinova Chile SA for $120 million, boosting access to Russia after the country banned fish imports from Europe.

The deal allows the Oslo-based company, controlled by billionaire John Fredriksen, to increase salmon output in Chile by 15,000 metric tons next year, equivalent to 23 percent of this year’s expected harvest, Marine Harvest said today in a statement. The assets include 36 sea-water licenses and have the capacity to produce 40,000 tons a year.

“It doesn’t hurt” to increase Chilean production capacity in the current situation, Marine Harvest Chief Executive Officer Alf Helge Aarskog said in a phone interview. “But it’s not the main reason. The main reason is that it strategically fits our operations in Chile in the long-term.”

The deal comes as Marine Harvest and other salmon farmers have seen exports shut out of Russia, which last month banned food imports from nations including Norway, the biggest salmon producer, in retaliation against sanctions over its role in the conflict in eastern Ukraine.

Fish farmers are seeking to redirect Norwegian output to other markets than Russia, which accounts for about 7 percent of global demand, while accessing the Russian market with output from units in such places as Chile and the Faroe Islands, which aren’t affected by the ban.

‘Cheapest M&A’

Marine Harvest gained as much as 0.4 percent in Oslo and was unchanged at 85.7 kroner at 11:20 a.m. local time.

The deal with Acuinova, a bankrupt unit of Spain’s Pescanova SA, also gives Marine Harvest a hatchery, a smolt facility and two processing facilities.

“The transaction price is considered favorable for Marine Harvest,” Kolbjoern Giskeoedegaard, an analyst at Nordea Markets, said in a note to clients. “This is the cheapest M&A growth they can have for the time being.”

If Russia’s import ban, due to last a year, stays in place, Marine Harvest’s increased Chilean capacity “will obviously be a positive additional factor for 2015,” he said.

Marine Harvest has increased exports of frozen salmon from Chile to Russia following the import ban on European produce, CEO Aarskog said, declining to provide details. Some of its new production from Chile will go to Russia though it will also target markets such as Brazil and the U.S., he said.

Prices Recover

Salmon prices in Russia have soared following the import ban and fallen in other markets such as the European Union and the U.S. Still, the benchmark price for salmon delivered in Oslo recovered some of the losses last week, rising 4 percent to 33.4 kroner a kilogram, according to Fish Pool ASA, a derivatives exchange. Oslo-listed salmon farmers have also pared losses from after the ban was imposed Aug. 7.

“There was never really a crisis,” Aarskog said. “It’s challenging for sales but we’re finding solutions. It’s going pretty well even if it leads to price pressure.”

Acuinova, together with Pesca Chile SA, another bankrupt Pescanova unit, earlier this month sold salmon farmer Noca Austral to Norway’s fish-feed producer Ewos AS.

The consolidation of Chile’s fish-farming industry, which is still recovering from a 2007 ISA virus outbreak, will continue, Aarskog said. Marine Harvest, which produced almost a quarter of the world’s salmon in the second quarter and is already Chile’s largest salmon exporter, may participate in new deals as it seeks to raise production through mergers and acquisitions both in Norway and Chile, he said.

“If there are good deals and it fits our structure, we’re interested,” Aarskog said.

Copyright 2014 Bloomberg.

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