Mitsubishi bids $1.4 billion for Cermaq to expand in food

Norway-based Cermaq is one of the largest players in the global salmon farming industry. The group has operations in Chile, Canada and Norway, with a total licensed capacity for farming of salmon of 200 thousand tonnes.
Bloomberg | 22 September 2014

Mitsubishi bids $1.4 billion for Cermaq to expand in food

By Masumi Suga, Mikael Holter and Ichiro Suzuki

Mitsubishi Corp. (8058), Japan’s biggest trading house, proposed to buy the Norwegian fishery Cermaq ASA (CEQ) for 8.88 billion kroner ($1.4 billion) to expand its foods business and become the world’s second-largest salmon farmer.

The offer is 14 percent more than Cermaq’s closing price on Sept. 19, Tokyo-based Mitsubishi said today in a statement. Cermaq’s headquarters will remain in Norway, it said. Cermaq recommended the offer be accepted.

Mitsubishi is following Japan’s other traders by moving into the food industry as a slowdown in the pace of Chinese demand for coal and iron ore prompts a shift in focus. In June, it inked a deal that will almost double its Australian grain handling volumes after buying a controlling stake in Olam International Ltd.’s unit in the world’s fourth-largest wheat exporting nation.

“We’re aware of the world’s increasing population and the need to secure stable supplies of food,” Yutaka Kyoya, a senior vice president of Mitsubishi, told reporters today in Oslo. “It is in this context that we recognize the potential of farmed salmon, which can respond to those growing needs, but with minimal impact on the environment.”
May Switch

The Norwegian government, Cermaq’s biggest shareholder, said it’s prepared to sell its shares to Mitsubishi, although it could switch to another buyer if presented with a more attractive offer. The Ministry of Trade, Industry and Fisheries owns 59.17 percent of Cermaq, the statement said.
Photographer: Krister Soerboe/Bloomberg

Rebekka Glasser Herlofsen, chairman of the board of Cermaq ASA, left, Yutaka Kyoya,... Read More

“This is a strategic fit,” Cermaq’s Chief Executive Officer Jon Hinder said at the press conference.

Mitsubishi’s offer for Cermaq is about 18 percent higher than the average price over the past three months, said Bent Rolland, an analyst at Fondsfinans ASA, which was an adviser in the deal. “The offer is fair,” he said by phone today.

The shares of Mitsubishi closed up 0.8 percent to 2,331.50 yen in Tokyo trading. Cermaq rose 15 percent to 97 kroner in Oslo as of 12:22 p.m., the most since May 2013.

A majority of Cermaq’s shareholders last year rejected a final bid from Marine Harvest ASA to buy Cermaq, including its fish-feed unit Ewos, for 107 kroner a share. The company instead sold Ewos to Bain Capital LLC and Altor Equity Partners and paid its owners an extraordinary dividend of 51 kroner.
Better Offer

Should the proposal of 96 kroner a share announced today go through, Cermaq’s shareholders will have earned almost 40 percent more, including dividend, than if they took Marine Harvest’s offer.

“We now have an offer on the table that’s much better financially, and we’ve decided to recommend it,” Cermaq Deputy Chairman Rebekka Glasser Herlofsen said in an interview in Oslo.

There had been other suitors for the company, Glasser Herlofsen said, declining to provide more details.

“We are very much confident on our price, which we think very reasonable and attractive for all shareholders,” Mitsubishi’s Kyoya said in an interview. “We will carefully study” what action to take if any higher bid came for Cermaq, he said.

Mitsubishi said in August profit fell 17 percent in the last quarter as sales of oil, gas and coal delivered 43.4 billion yen in net income, down from 64.4 billion yen a year earlier. Smaller rival Marubeni Corp., the biggest seller of soybeans to China, posted record profit in the three months ended June, while Itochu Corp., which paid $1.3 billion last year for Dole Foods Co.’s canned fruits and Asian grocery business, saw net income jump 13 percent.
Chile Fish

While presenting its mid-term business plan in May last year, Mitsubishi said it’s seeking to double the size of its profit from operations outside metals and energy to 360 billion yen a year ($3.3 billion) by about 2020.

Cermaq got 55 percent of its production in the first half of the year from Chile, which is still allowed to export fish to Russia after it banned imports from Norway and other nations in retaliation for sanctions over its role in the Ukraine conflict.

“I don’t think this has affected the M&A interest,” Cermaq’s CEO Hindar said. “I would maybe say on the contrary, because the situation has impacted prices negatively in all markets.”

To contact the reporters on this story: Masumi Suga in Tokyo at [email protected]; Mikael Holter in Oslo at [email protected]; Ichiro Suzuki in Tokyo at [email protected]

To contact the editors responsible for this story: Jason Rogers at [email protected] Indranil Ghosh, Randall Hackley
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