NTS would clearly be a catch. Over the course of a week, two bidders shot their lines over the Norwegian salmon farmer’s nose. The newest comes from the bigger competitor Mowi, whose offer of NOK 13.8 billion ($ 1.54 billion) includes a premium of 24 percent. The fragmented aquaculture industry is consolidating. Analogy about big fish swallowing smaller ones applies.
The process began earlier this century. Three-quarters of farmed salmon suppliers in the three largest producer countries – the other two being Chile and Scotland – have fallen prey to suppliers in the past decade.
It speaks of salmon farming economy and the limited supplies of licenses. A three-year production cycle makes a capital-intensive business and one, like many others, subject to rising costs.
NTS illustrates the food chain. In August, he acquired Norway Royal Salmon, which he then used to conclude a deal that would give majority ownership of the world’s sixth largest salmon farming supplier.
Mowi’s bid is worth a quarter above the average volume weighted price in the 30 days before the earlier bid on January 17th. The group proposes to fund the transaction with equal portions of cash and shares.
Barclays estimates this with the balance sheet and hopes to obtain savings equal to 2-4 percent of NTS’s revenue from the transaction. NTS will increase the tonnage grind in its sea cages by about a fifth.
The pandemic has pushed share prices into the sector as closures have closed restaurants and hotels. In the longer term, salmon will still occupy a useful place in the food basket: less sober than red meat, but with a much smaller carbon footprint than red meat and also healthier.
However, salmon fishing is an expensive occupation. NTS’s shares immediately rose above the NKr110 offer price on Monday. The group of investors who announced the earlier bid of NKr 13.2 billion controls more than 50 percent of the share. They will play a crucial role in transaction talks that may still take place. As poor anglers know, the quarry can easily spit the corner before it is nested.
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