e acquisition of Peruvian fish meal company Copeinca by Cermaq will increase the quality of fish feed, benefiting clients and ensuring the correct content of marine omega-3 in fish. Cermaq's Board of Directors recommends that the Shareholders support the proposed transaction with Copeinca.The acquisition of Copeinca will secure access to a crucial raw material in fish feed and also improve the quality of the end product. Cermaq's feed operations have over the last seven years reduced the share of marine raw materials by approximately 50 per cent. The company will continue develop fish feeds based on alternative raw materials.
"We have documented marine proteins that are a necessity in high performing salmon feed. Through acquiring Copeinca we will secure a large portion of our Omega-3 demand. At the same time the acquisition will allow us to integrate the two companies' innovation process, increasing the quality of fish meal. When we at the same time reduce our costs through improved logistics we will be in a position to capture significant synergies," said Einar Wathne, COO of Cermaq's fish feed operations.
The acquisition of Copeinca will generate yearly synergies of NOK 250-270 million. With subtracted financial gain's, the synergies are estimated at NOK 190-200 million. Approximately 75 per cent of the gain's will stem from quality improvement and 25 per cent from logistics and rationalisation.
No Alternatives in Near Future
Fish oil is a critical input factor in feed production, securing the salmon's intake of EPA-DHA fatty-acids (Omega-3). Copeinca's anchovy quota is among two of the most attractive in the world and can not be replaced by discards in the foreseeable future.
While production of fish feed has increased considerably, the supply of fish oil has remained constant. There are not enough sources of marine omega-3 to supply the expected long-term growth in the aquaculture industry. Due to this fact alternative sources of marine Omega-3 are subject to considerable interest and research.
However, large scale commercialisation of these resources industry is at least five to 10 years in the making. Hence, fish oil will remain a crucial and strategically important resource for Cermaq, where access will be secured by Acquiring Copeinca.
Significant Financial Gains in Improving Fish Meal
Fish meal is an important ingredient in fish feed. The quality varies considerably and greatly affects the growth of salmon. A salmon fed on the highest quality grade fish meal grows twice as fast as a salmon fed on the stop grade. EWOS Innovation has developed a proprietary measuring method to identify the fish meal's properties so that the quality can be adapted to different markets. Copeinca's raw material, Cermaq's measuring technique and the integration with Cermaq's production technology and infra-structure is expected to give the combined company a considerable competitive advantage in the aquaculture industry going forward.
Considerable Sourcing and Efficiency Gain's
In 2012, Cermaq's feed operations sourced raw materials for probably close to 10 trillion. Marine raw materials constituted approximately 30 per cent. With such large volumes there are considerable gain's to be made by controlling the raw material supply chain.
"We expect logistics and sourcing gain's that probably 50 million and improved feed quality at NOK 150 million per year. In addition, the Copeinca acquisition will yield financial consolidation gains of NOK 70 million. However, the most important aspect is that we are taking strategic and operational measures in a central part of our value chain," said Tore Valderhaug, Chief Financial Officer of Cermaq.
"We have for a long time publicly stated that we are in favour of further consolidation in the industry, however this requires that the price paid to Shareholders fully reflects the underlying values and gives all Shareholders their share of the synergy gain. Marine Harvest's potential victim Cermaq does not fulfill these requirements. A 'yes' to Copeinca is not a 'no' to consolidation, and in our opinion, an acquisition of Copeinca would improve the attractiveness of Cermaq in such a strategy," said Mr Valderhaug.
