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Grieg Seafood — M&A Activity 2020
Feb 7, 2020
3612_iss_2020-02-07_56e423bd-bad9-44ac-a97c-92736b126255.html
M&A Activity
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Grieg Seafood ASA takes the next step on its growth journey by acquiring Grieg Newfoundland AS
Grieg Seafood ASA takes the next step on its growth journey by acquiring Grieg Newfoundland AS
Bergen and Marystown, February 7, 2020
* Grieg Seafood ASA (OSE: GSF) has signed Share Purchase Agreements (SPA) for
the acquisition of Grieg Newfoundland AS in Newfoundland, Canada.
* The Newfoundland project includes exclusivity for salmon farming in
Placentia Bay, which has a farmable area bigger than the Faroe Islands.
* The project currently comprises licenses for 11 sea sites. 3 licenses are
approved, 3 are expected to be approved in 2020 and the rest are in
different stages of application. The project also includes a high-end
Recirculating Aquaculture System (RAS) facility under construction.
* The project has a long-term annual harvest potential of 30 000 - 45 000
tonnes Atlantic salmon.
Grieg Seafood has an ambitious strategy for long-term sustainable growth and
development. By 2025, the company aims to harvest at least 150 000 tonnes of
Atlantic salmon, to achieve cost leadership and to re-position itself in the
value chain from a pure commodity supplier to a customer innovation partner.
Growth will be achieved through post-smolt investments, M&A activity and organic
growth. Value chain repositioning will be achieved through increased presence in
the market with partnerships, category development and brand cultivation. The
acquisition of Grieg Newfoundland AS strongly underpins the 2025 strategy. The
first harvest will be in 2022/23, and the region is expected to contribute
15 000 tonnes annual harvest by 2025.
Commenting on the acquisition, Grieg Seafood CEO, Andreas Kvame, says:
"For the past few years, we have focused on utilizing our existing licenses with
success. This year, we will reach our target of 100 000 tonnes. Now we are ready
for the next step on our growth journey. By developing salmon farming operations
in Newfoundland, using cutting-edge technologies at all stages of the production
process, we are strengthening our position as a global leader in sustainable
salmon farming.
The US market is the world's largest and fastest growing market for Atlantic
salmon, but only a third of US demand is currently met by North American
production. We already have a position in this market through our operations in
British Columbia, where we have attained significant sales and marketing
experience. With close proximity to important markets on the East Coast of the
US, this acquisition significantly strengthens our US market exposure and opens
up for synergies with existing operations."
A brief history of the Newfoundland project
* The Newfoundland project was initiated by Grieg Kapital AS and Per Grieg Jr.
in collaboration with their local partner Ocean Choice International Ltd. in
2014. Grieg Kapital AS is owned by the majority owner of Grieg Seafood ASA,
the Grieg Group. Per Grieg Jr. is Chairman of the Board of Grieg Seafood
ASA.
* In 2015, a memorandum of understanding (MOU) to produce Atlantic salmon on
seawater grow-out sites across four areas of Placentia Bay was signed with
the Province of Newfoundland. 11 licenses for sites are currently approved
or in different stages of application.
* The Newfoundland project received Environmental Impact Study (EIS) approval
in August 2018 for Placentia Bay.
* The Newfoundland project also comprises a high-end Recirculating Aquaculture
System (RAS) facility. Construction of the onshore smolt-facility commenced
in April 2019.
Specific conditions of the Newfoundland project
* The Newfoundland project includes long-term exclusive farming rights to the
Placentia Bay area.
* The marine sites are in an area with favourable biological conditions for
salmon farming.
* Temperature profile is similar to the Grieg Seafood's Norwegian operations.
Fluctuating temperatures in the water can occur in Newfoundland, with low
temperatures in the winters and a recent incident of high summer
temperatures in another part of the island.
* The area is highly isolated from other salmon farmers in the region. Long
distances and low interconnectivity between sites lower risk of biological
contamination between sites.
* Licenses require sterile salmon.
Equipment plan for the Newfoundland project
* The sites are exposed to high seas and all sites will be equipped with
state-of-the-art technology and systems for harsh environments.
* 40-meter-deep pens and underwater feeding will reduce risk related to super-
chilled or potential warm water.
* Grieg Seafood's post-smolt strategy will be implemented in the region,
increasing robustness of the fish at all stages in the sea and reducing time
in the sea to potentially comprise only one winter.
* The fresh water RAS facility is planned to include a hatchery, a smolt
facility and three post-smolt modules with potential annual capacity of
7 000 tonnes upon completion.
A stepwise approach to ensure risk management
The Newfoundland region will be developed gradually. Grieg Seafood will follow a
stepwise approach to increased production and planned investments will be
subject to frequent review and evaluation to ensure the viability and
sustainability of growth and production. Grieg Seafood expects cost potential
similar to its Norwegian operations and will leverage long experience producing
in cold water. It also expects investment per kg to be similar to new sites in
its Norwegian operations.
Production plan for the Newfoundland project
* The first phase has an annual harvest volume target of 15 000 tonnes to be
reached by 2025. First harvest in 2022/2023.
* The second phase has an annual harvest volume target of up to 33 000 tonnes.
* The long-term harvest potential in Placentia Bay of 45 000 tonnes will
depend upon prudent risk management, approvals according to EIS plan and
sustainable and profitable production.
* On harvesting and processing, Grieg Seafood will collaborate with their
local partner Ocean Choice International Ltd.
"Grieg Seafood has close to 30 years of experience with fresh water, post-smolt
and sea water production of Atlantic salmon. Going forward, we will increase our
focus on sustainability, fish welfare, reduction of carbon emissions and
responsible farming practices. We will bring our best expertise, technology and
knowledge into the development of the Newfoundland region, to ensure that we
create value for all of our stakeholders alike: investors, customers, employees
and not least for the local communities in Newfoundland," says CEO Andreas
Kvame.
Also commenting on the transaction, Stig Grimsgaard Andersen, Chairman of the
Board of Grieg Kapital AS, says:
"Over the last few years, we have been able to make significant progress in the
planning and development of this project and in 2019 we started construction of
an advanced RAS facility at Marystown Marine Industrial Park, close to Placentia
Bay. At this stage, we are fast approaching the initial smolt and seawater
production phase. We are therefore glad to hand the reigns over to an
organization with exceptional operational experience, financial capacity and
scale to take full advantage of this opportunity. Our confidence in the
viability and potential of this project is even further strengthened with Grieg
Seafood at the helm and we are very happy to retain exposure to- and
participation in this project through our continued ownership in Grieg Seafood
ASA."
Transaction details
* Grieg Newfoundland AS is owned by Grieg Kapital AS (39%), Kvasshøgdi AS
(39%), Ocean Choice International Ltd. (OCI) (19.5%) and Knut Skeidsvoll
(2.5%).
* Agreement to acquire 99% of the shares of Grieg Newfoundland AS and Grieg
Seafood ASA has an option agreement to acquire the remaining 1% of the
shares, which is retained by OCI.
* Settlement for phase one of the production plan includes an up-front payment
of NOK 620.5 million. NOK 264 million of this amount is for the work that
Grieg NL has done in the project so far, including licenses with harvest
capacity of 15 000 tonnes (NOK 17.6 per kilo). The remaining amount is
related to investments already made in the project by Grieg Newfoundland AS.
* When phase two is initiated, a further potential settlement of up to NOK
930 million is triggered by harvest volume milestones to be reached during
the first 10 years of operation following the transaction.
* The first milestone payment will be made when the company reaches planned
annual harvest volume of more than 15 000 tonnes and the last at annual
harvest volume of 33 000 tonnes.
* Milestone payments will amount to NOK 43 per kg from 15 000-20 000 tonnes
and NOK 55 per kg from 20 000-33 000 tonnes.
* NOK 250 million of the up-front payment will be settled through issuance of
new Grieg Seafood shares to the sellers of Grieg Newfoundland. The
subscription price for the consideration shares will equal the volume
weighted average closing price of the shares in Grieg Seafood over the three
days prior to signing. The rest of the transaction will be financed through
increased debt facilities.
* The transaction is conditioned upon approval from Extraordinary General
Meeting.
SpareBank 1 Markets AS has acted as financial advisor to Grieg Seafood ASA in
connection with the transaction, and Advokatfirmaet Schjødt AS has acted as
legal advisor to Grieg Seafood ASA in connection with the transaction. Wikborg
Rein Advokatfirma AS has acted as legal advisor to the sellers of Grieg
Newfoundland.
Fairness opinion
Deloitte AS has conducted a third-party verification of the valuation of Grieg
Newfoundland AS.
Conference call: February 7, 2020, at 08:00 CET
A conference call and audiocast followed by Q&A will be hosted by CEO Andreas
Kvame and CFO Atle Harald Sandtorv at 08:00 CET. The call will be conducted in
English.
The presentation is attached to this notice and available on
https://www.griegseafood.no/inverstors/investor/.
The audiocast with supporting slides will be available on
https://grieg.eventcdn.net/202002/
Dial in details for the conference call and Q&A:
CA: +18447479615
DE: +4969222220377
DK: +4582333194
FI: +358981710523
IE: +35312232016
NO: +4723500236
SE: +46850558359
UK: +443333009031
US: +18446251570
Please note that it will only be possible to ask questions over the conference
call.
For more information, contact:
Investors
Andreas Kvame, CEO, Grieg Seafood ASA
+ 47 90 77 14 41
[email protected] (mailto:[email protected])
Atle Harald Sandtorv, CFO, Grieg Seafood ASA
+ 47 90 84 52 52
(mailto:[email protected])
Media
Kristina Furnes, Global Communications Manager, Grieg Seafood ASA
+47 48 18 55 05
(mailto:[email protected])
About Grieg Seafood
Grieg Seafood ASA is one of the world's leading salmon farmers, specializing in
Atlantic salmon. The Group has a production target of 100 000 tonnes gutted
weight in 2020.
Our farming facilities are in Finnmark and Rogaland in Norway, British Columbia
in Canada and Shetland in the UK. Approximately 780 people are employed by the
Group. Grieg Seafood ASA was listed at the Oslo Stock Exchange in June 2007. Our
headquarters are situated in Bergen, Norway. The business development of Grieg
Seafood ASA focuses on profitable growth, sustainable use of the ocean and being
the preferred supplier to selected customers.
To learn more, please visit www.griegseafood.com
This information is subject to the disclosure requirements pursuant to Section
5-12 the Norwegian Securities Trading Act