Cermaq calls Marine Harvest offer inadequate

Cermaq comments on Marine Harvest's announcement of a potential conditional, unsolicited takeover offer for all outstanding shares.

May 2, 2013

6 Min Read
Cermaq calls Marine Harvest offer inadequate

Cermaq comments on Marine Harvest's conditional, unsolicited takeover offer.

Cermaq refers to the announcement by Marine Harvest ASA 30 April 2013 of a potential conditional, unsolicited takeover offer for all of the outstanding shares of Cermaq ASA. According to the announcement, if the potential offer is launched, the consideration per Cermaq share will consist of NOK 53 in cash and NOK 52 in Marine Harvest shares, representing a total of NOK 105 per Cermaq share. The potential offer will be reduced to NOK 104 following distribution of the proposed dividend in Cermaq to be approved 21 May 2013. The share price of Cermaq on 30 April 2013 closed at NOK 86.

Launch and completion of the potential offer is subject to a number of conditions, including the Cermaq shareholders deciding not to carry out the Copeinca transaction announced by Cermaq on 5 April 2013.

For a full description of the potential offer and the terms thereof, Cermaq refers to the press release from Marine Harvest issued on 30 April 2013.

Strategic rationale for the transaction proposed by Marine Harvest
Cermaq has noted the strategic rationale presented by Marine Harvest for the potential proposed transaction. As communicated on previous occasions, Cermaq is supportive of further consolidation in farming in selected geographical markets and has already demonstrated its commitment to participate in such transactions. Cermaq has further built global leadership positions both in feed and farming, and now recently in marine ingredients with the announced acquisition of Copeinca. Cermaq agrees that a further restructuring of the aquaculture industry would create value, and would hence generally look constructively on initiatives seeking to deliver these benefits.

The Copeinca transaction
As mentioned above, the launch of Marine Harvests potential offer is conditional upon the Cermaq shareholders deciding not to carry out the Copeinca transaction. Cermaq fundamentally disagrees with Marine Harvest's views as to the merits of this transaction and reiterates that it continues to believe firmly in the strategic rationale for and attractiveness to Cermaq of the Copeinca acquisition. Extensive contact with a number of feed customers and business partners provide additional support to our strategic conclusions. Cermaq is very confident in the deliverability of the announced annual synergies from the transaction which currently are estimated to NOK 250-270 mill. A significant part of the synergies are originating from Cermaq's leading position in feed. Based on its comprehensive experience through decades, Cermaq has a profound knowledge and insight of the challenges related to aspects such as sourcing, formulation, research, substitution, and logistics. Whereas fish meal is more available and to a larger extent can be substituted in fish feed than fish oil, a certain content of marine ingredients, including fish meal, is a prerequisite for high performance fish feed to salmonid species. Even more critical is that Cermaq considers omega-3 from fish oil to represent a real limitation for further growth in the salmon industry. Cermaq will through the acquisition secure more than 50% of its current omega-3 requirements. The Copeinca transaction would thus offer additional benefits to any consolidating transaction in feed and/or farming.

Further, pursuant to the agreements entered into with Copeinca, Cermaq is under an obligation to complete the agreed process for the transaction. This is preventing the company from entering into discussions with Marine Harvest which are based on the presumption that the Copeinca transaction is not completed.

For all of the above reasons, the process to complete the Copeinca transaction will continue as planned.

Considering the situation and Marine Harvests expressed intention of voting against the Copeinca transaction, Cermaq will review all of its options, including alternative financing, to secure completion of the transaction should this be required to protect the interests of all of its shareholders.

The Board's evaluation of the potential conditional offer
As referred to in the Marine Harvest announcement, Marine Harvest has earlier contacted Cermaq with a proposal to solicit a voluntary offer recommended by the Cermaq Board of Directors. For the reasons outlined above, Cermaq was not in a position to engage in discussions of the potential proposal as it was presented by Marine Harvest. While the financial terms of the potential offer were not disclosed at the time, the approach has allowed Cermaq to fully update its view as to the value of the company.

The Cermaq Board of Directors has now reviewed the terms of Marine Harvest's potential conditional offer as set out in the recent public announcement. After careful consideration with the assistance of its advisors, the Board has concluded unanimously that the Marine Harvest potential conditional offer significantly undervalues Cermaq and does not reflect the synergies that Marine Harvest underlines in its press release. In its evaluation, the Board has also taken into account that the consideration is partly in the form of shares in Marine Harvest.

The Board has noted that Marine Harvest sees the announcement of the Copeinca transaction as a reason for the recent relative underperformance of the Cermaq share. Assuming that this is correct, Cermaq excluding Copeinca,which is the entity that Marine Harvest potentially is bidding for, would currently have been trading above the NOK 91 level which is where it was trading at 4 April, the day immediately preceding the announcement of the Copeinca transaction. This would imply a substantial reduction in the true premium paid by Marine Harvest to achieve full control of Cermaq.

The Board also points to the fact that the Cermaq share price traded above NOK 100 as recent as in March 2013.

In view of all of the above, the Cermaq Board strongly urges shareholders to support the completion of the Copeinca transaction as planned. Recognising that this, based on the conditions presented, may prevent the launch by Marine Harvest of its potential offer, the Board and management of Cermaq is fully committed to take such actions as would be required to deliver value to its shareholders which are consistent with the Board's evaluation as set out above.

Comments to certain other elements of the conditional offer
The potential offer is subject to a number of conditions, none of which will have been lifted before 21 May 2013, the date for the Cermaq general assembly.

- The potential conditional offer has a cap on the number of Marine Harvest shares to be issued as consideration per Cermaq share. Any material share price increase in Marine Harvest before 21 May 2013, the date of the Cermaq general assembly, will not benefit Cermaq shareholders under the offer.

For the avoidance of doubt, the potential conditional offer from Marine Harvest is not an item on the agenda for Cermaq's Annual General Meeting on 21 May 2013. We refer to the notice of the Annual General Meeting distributed on 30 April 2013.

ABG Sundal Collier is acting as financial advisor and the law firm Schjodt is acting as legal counsel to Cermaq.




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