Norway’s two largest cod farmers merge

Codfarmers ASA (COD) and Atlantic Cod Farms AS (ACF) on Friday agreed to merge, reports

Norway's two largest cod farmers expect the deal to be completed in August and the rights issue to be completed in September.

The new company will have capacity to produce 20,000 metric tons of cod annually. COD's production facilities are located in Nordland, while ACF's facilities are centered in Sunnmøre.

The deal is structured as a share-for-share exchange, in which ACF shareholders will receive COD shares as consideration for their ACF shares. Based on the agreed exchange ratio and assuming 100 percent acceptance from ACF shareholders, COD shareholders and ACF shareholders will own 51.1 percent and 48.9 percent, respectively, of the new company.

The new company will hold a rights offering in the range of NOK 54 million and NOK 90 million at a subscription price of NOK 6.80 per share to repay interest bearing debt and to strengthen the company's working capital. A minimum amount of NOK 54 million has been underwritten by existing COD and ACF shareholders.

A new board will be elected, and COD CEO Harald Dahl will become CEO of the new company.

In explaining the merger, Dahl said Norway's cod-farming business has been through "a very difficult period" due to high production costs and low market prices, which forced the industry to downscale. But last year the companies restructured, lowering costs and reducing debt.

"While there in 2007-08 were 30 to 35 companies that released juveniles into sea, there are now only 3-4 companies left," he said. "Both companies have the last year gradually increased their control over production costs, and the fish the companies released to sea in 2010 shows an improved growth rate compared to previous generations. In addition, the prices on cod have gradually improved the last year, from low of NOK 20 to over NOK 30 per kilogram. CODs strategy to develop a consumer packed product - STRØM - has been successful. We have experienced a significant growth in the sales and received positive feedback with respect to the quality and packing of the product."

ACF CEO Ivar Kvangardsnes said the time is right for the merger: "ACF has the previous months made significant structural changes, including financial and organizational changes. The timing is right for a structural solution with COD that realizes significant synergies to the benefit of the shareholders and the employees."

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