MORPOL - acquisition of 90.5% in MARINE FARMS ASA

September 17, 2010 15:35

Morpol ASA ("Morpol") has acquired 57.6 % of the shares in Marine Farms ASA ("MAFA") at a price of NOK 18.50 per share, and consequently controls 90.5 % of the company. Morpol intends to launch a mandatory cash offer to purchase all outstanding shares in MAFA or initiate a mandatory redemption in accordance with the Public Limited Liability Companies Act Section 4-25, reports with reference to Morpol.


MAFA is listed at the Oslo Stock Exchange ("OSE") with the ticker MAFA

Marine Farms ASA has been involved in the fish farming business since 1976 and has considerable knowledge of all aspects of fish farming, from broodfish to the finished product. MAFA' core competence is its technical and biological know-how and innovativeness. The Group's operations mainly consist of salmon farming in the U.K. and seabass / seabream in Spain. These activities are run through the 100% owned companies Lakeland (U.K.) and Culmarex (Spain), both being fully integrated companies and among the most profitable in their respective markets. In addition, MAFA is engaged in farming of the fast growing marine species cobia in Vietnam and in Belize. The Group had a turnover of NOK 879 million in 2009 and had 647 employees per 30.06.2010.

Salmon (Lakeland Group)
Lakeland has been operating within the salmon farming industry since 1987, and specialises in vertically integrated production of Atlantic salmon, all the way from the broodfish through egg, fry, parr, smolt and fully grown salmon to the sale of gutted salmon and fresh fillets. Lakeland's hatchery business is the largest third party supplier of salmon ova and smolt to the UK market. The Company has a production capacity of over 60 million ova and up to 10.0 million smolt.

Lakeland has today an annual production capacity averaging approximately 13,500 tonnes gwt. Due to a fallowing regime in Scotland, however, Lakeland's production capacity can vary between 12,500 tonnes gwt and 14,500 tonnes gwt any given year.

Lakeland is planning to sell approximately 12,000 tonnes gwt of own produced salmon in 2010. For 2011,
the plan is to sell approximately 14,000 tonnes gwt.

Seabass/seabream (Culmarex Group)
Culmarex was founded in 1986 and commenced the production of various marine species such as yellowtail and oysters. In 1990 the Company was purchased by MAFA and it was then decided to focus its activities on seabass and seabream, two relatively highly priced white meat fish from the Mediterranean. The fish grow relatively slowly and are sold round from 350g and upwards. Culmarex is today a vertically integrated supplier of seabass and seabream, and conducts all parts of the production, from broodfish through the pre-ongrowing of juveniles up until the fish is ready for the market. Culmarex has approximately 340 employees and the Company is renowned for its good service and high quality. This is reflected in the prices the Company achieves in the market for its fish. 

Culmarex has today a licenced production capacity of approximately 10,200 tonnes. Expectations are that Culmarex will receive permits for expansions of existing farms in the years ahead.

Culmarex is planning to sell approximately 8,400 tonnes of own-produced seabass and seabream in 2010.
For 2011, the plan is to sell approximately 9,000 tonnes.

Cobia (Belize and Vietnam)
Cobia is a white meat fish that lives in tropical waters (20-30C°). It grows from 1 gram to 5-6 kg in one year and the fillets are popular in sushi and other dishes. Cobia is a relatively unknown species. However, Cobia has all the desired traits for a farmed fish such as good eating qualities, large fillets, high on Omega-3, do well in cages, fast growth, year round egg supplies and an efficient production. MAFA started cobia farming in 2002 with the operation of a hatchery in Florida. This hatchery was closed down in 2007, when the Company started the construction of a new hatchery in Belize. The new hatchery was completed in 2009, with a capacity of 1-2 million cobia juveniles. Farming of cobia for fresh export to the US started in Belize in 2006. The Company has now a vertically integrated production of cobia in Belize. Farming of cobia in Vietnam started up in 2006, the strategy being fresh export to the Asian market and frozen export to other markets. All major investments in infrastructure and farming equipment are now in place, both in Belize and in Vietnam. However, the operations are set up for significant increased production volumes, resulting in losses when production is low.

Based on the decision of the Board of Directors at MAFA, the cobia business in Belize has been put up for sale.

Board of Directors  
Currently the Board of MAFA consists of seven members. All Board members are independent of the Company's Executive Management. The Board members Mr. Epameinondas Lambadarios, Mr. Aristides Belles and Mr. Dimitris Loumpounis represent the former shareholder Nireus Aquaculture SA who until Morpol's acquisition of shares controlled 33.0% of the Company. They were therefore considered dependent of one of the Company's main shareholders. The remaining four board members, Ms. Kristin Krohn Devold, Ms. Tone Bjornov, Lady Katherine Innes Ker and Mr Edoardo Bugnone are independent of the Company's main shareholders. The following provide a profile of the current members of the Board:

Mr. Epameinondas Lambadarios, (born 1944), Chairman of the Board
Mr. Lambadarios has a law degree from Harvard Law School. Today he is Managing Partner of Lambadarios Law Firm. In addition he holds several board assignments, amongst other on the board of Nireus Aquaculture SA. Mr. Lambadarios has been member of the Board since March 2010 and is up for re-election in 2012. Mr. Lambadarios is a Greek citizen.

Dimitris Loumpounis, (born 1955), Board member
Mr. Loumpounis holds a degree in Mechanics/Electrics from the Technical University of Athens. Today he is an executive board member of Nireus Aquculture SA. Mr. Loumpounis has been member of the Board since May 2009 and is up for re-election in 2012. Mr. Loumpounis is a Greek citizen.

Tone Bjornov, (born 1961), Board member
Ms Bjornov holds a degree in business administration from the Nowegian School of Management. Today she is Partner with Valutacorp AS. In addition she holds several board assignments. Ms. Bjornov has been member of the Board since May 2009 and is up for re-election in 2012. Mr. Bjørnov is a Norwegian citizen.  

Aristides Belles, (born 1953), Board member
Mr. Belles holds a degree in Business Administration from the Piraeus University. He is founder of Nireus Aquaculture SA and today he is the Chairman and Managing Director of the Board of Directors, as well as the major shareholder of the company. In addition he holds several board assignments. Mr. Belles has been member of the Board since March 2010 and is up for re-election in 2012. Mr. Belles is a Greek citizen.

Kristin Krohn Devold, (born 1961), Board member
Ms. Krohn Devold holds a Master of Science Degree in Business from the Norwegian School of Economics and Business Administration (NHH). Today she is Secretary General in The Norwegian Mountain Tracking Association. She has a background from the Norwegian parliament and government. In addition she holds several board assignments. Ms. Krohn Devold has been member of the Board since March 2010 and is up for re-election in 2012. Mr. Krohn Devold is a Norwegian citizen.

Lady Katherine Innes Ker, (born 1960), Board member
Lady Katherine Innes Ker holds a D.Phil in Molecular Biophysics and a Hons Degree in Chemistry from Oxford University. She has broad board experience as well as relevant knowledge of the investment and financial sector. Today she holds several board assignments. Lady Innes Ker has been member of the Board since March 2010 and is up for re-election in 2012. Lady Innes Ker is a UK citizen.

Edoardo Bugnone, Board member
Mr. Bugnone holds a degree in Commercial Sciences and Business Administration from the University of Geneva . He is a founder and CEO of John Isaac SA. He is also a Founding Partner of private equity firm Top Quartile Partners. Between 2001 and 2002, Mr. Bugnone was Chairman of the European Private Equity and Venture Capital Association (EVCA). Mr. Bugnone has been member of the Board since March 2010 and is up for re-election in 2012. Mr. Bugnone has Swiss and Italian citizenship.

Vasilis Theofanopoulos, (born 1973), Deputy board member
Mr. Theofanopoulos holds an MBA with Distiction from London Business School with concentration in Finance, Strategy & Private Equity. Mr. Theofanopoulos currently serves as Nireus Group's Director of Strategy, M&A and Corporate Development. Mr. Theofanopoulos has been deputy member of the Board since May 2009 and is up for re-election in 2012. Mr. Theofanopoulos is a Greek citizen.

Morpol ASA will following the transaction change the Board.

The Executive Management of MAFA includes the following:

Bjorn Myrseth, Bergen (born 1944), CEO
Mr. Myrseth is a fishery biologist from University of Bergen; due to his long tenure and considerable expertise, he is by many considered one of the pioneers of the modern fish farming industry. Mr. Myrseth was also one of the founders of Stolt Sea Farms where he held the position as CEO from 1972-1987. Mr. Myrseth is a Norwegian citizen.

Pal Angell-Hansen, Bergen (born 1969), CFO,
Mr. Angell-Hansen holds a Master of Science in Shipping, Trade & Finance from Cass Business School. From September 2005 he has been permanently employed at MAFA. He is a former independent consultant, investor and advisor at SND Invest with main focus on seafood companies. Mr. Angell-Hansen is a former analyst with SEB Merchant Banking. Mr. Angell-Hansen is a Norwegian citizen.

William Liston, Scotland (born 1945), CEO Lakeland
Mr. Liston has his education from the Edinburgh Academy and has broad managerial experience from more than 40 years in the seafood industry, engaging in sales and marketing in particular. Mr. Liston is together with his wife the founder of the sales company Sea Products of Scotland, currently owned by MAFA. Mr. Liston is a UK citizen.

Dr. Geoffrey Smart, UK, (born 1947), CEO Culmarex
Dr. Smart holds a Ph.D. in fish physiology from the University of Bristol and is a Master of Science from University of London. He also holds a H.N.D. from University of Wolverhampton. Dr. Smart has been part of MAFA since 1986. Dr. Smart is a UK citizen.


Morpol ASA ("Morpol") has on 17 September 2010 acquired 21 083 407 shares in Marine Farms ASA ("MAFA") at NOK 18.50 per share. In addition Morpol has bought all 6 032 823 shares in MAFA owned by its main shareholder Friendmall Ltd at NOK 18.00 per share. After the transactions, Morpol owns 33 148 407 shares in MAFA, corresponding to 90.5% of the outstanding shares in MAFA.


Morpol's average cost price per MAFA share is NOK 18.34. This corresponds to NOK 671 million for 100% of the outstanding shares in MAFA. Net debt in MAFA as of June 2010 was NOK 615 million. Total implicit enterprise value is NOK 1,286 million.

Morpol has based its offer on the following relative enterprise valuation; Lakeland NOK 900 million, Culmarex and Cobia in total NOK 400 million. Lakeland has significantly external sale of ova and juveniles which represents approximately NOK 15-20 million in annual EBIT. The value of external sale of juvenile and ova business is estimated to be NOK 120 million, hence the implicit value of Lakeland farming business is NOK 780 million before considering synergies. 

Lakeland expects to sell 12,000 tonnes salmon in 2010, and 14,000 tonnes salmon in 2011. Based on an average harvest volume of 13,000 tonnes going forward due to fallowing regime in Scotland, the EV/kg multiple for Lakeland farming is approximately NOK 60.


Morpol ASA will finance the acquisition with available cash resources.


MAFA's Scottish operation in salmon farming, Lakeland, has consistently delivered strong results and has an estimated harvest of 12,000 tonnes for 2010 and plan to sell 14 000 tonnes in 2011. The activities of the recently acquired Mainstream Scotland will be integrated into Lakelands operations. Through the two units Morpol will have established a farming cluster with potential for 25 000 tonnes of annual harvest. Morpol expects synergies of 2-3 NOK per kilo of raw material utilization and 1 NOK per kilo on the farming integration. Morpol expects to utilize the strong freshwater operations of Lakeland to produce larger smolts to maximize growth within its seawater farming operations of all the recently acquired companies.

Additionally, MAFA has interesting activities in Seabass/Seabream through Culmarex as well as emerging operations in Cobia farming with the main activities in Vietnam.

Morpol intends to hold the Culmarex and Cobia assets for sale or a potential spin off as a separate listed company.

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