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Marine Harvest is leading a feeding frenzy in the seafood industry. The world's biggest fish farmer recently swallowed Morpol, a smoked-salmon specialist. Now it is angling for another Oslo-listed rival, Cermaq. But Marine Harvest's $1.7-billion (U.S.) hostile bid might need a little improving.
Norway is the global hub for fish farming. Its bourse houses most of the industry's listed companies, even if farms are based in Scottish, Canadian or Chilean waters. Marine Harvest is emphatically the biggest fish in this pond: the $4-billion company, backed by shipping tycoon John Fredriksen, is the country's only blue-chip fishing stock.
The firm could get still bigger. Fish will become an increasingly important source of protein as the world's population swells, because it can be produced far more efficiently than meat, Marine Harvest reckons. Until now, the group had been constrained at home by rules capping domestic market share at 25 per cent. This is being raised to 40 per cent: so Marine Harvest can pursue Cermaq, whose salmon farms in northern Norway complement its own in the south.
At 105 kroner ($18.24) a share, Marine Harvest's cash-and-share bid values Cermaq at about $1.7-billion, or, including debt, an enterprise value of about $2.2-billion. The suitor trumpets a 22-per-cent premium. But in fact, this offer does not look too generous. The price implies a lower enterprise value to EBITDA ratio than Marine Harvest's own for 2014. It also reflects a lower per-share value than analysts' average price target of 111 kroner, according to Starmine.
And Cermaq argues, with some justice, that Marine Harvest's touted premium is misleading. It notes that its shares are depressed because it is engaged in a bid tussle of its own: it is battling Singapore-listed China Fishery Group for Copeinca, a Peruvian-based fish meal producer. And Cermaq planned to issue stock to finance the deal. Marine Harvest wants Cermaq to drop the bid.
Much depends on the Norwegian government, which owns 43.5 per cent of Cermaq. A sweetener of 10 per cent or so can often help turn a hostile deal friendly. Some extra bait here could help Marine Harvest land its catch.