Grieg Seafood buys up Grieg NL in £130m deal
Norwegian salmon farmer Grieg Seafood is to buy separate Canadian operation Grieg Newfoundland in a deal that could be worth up to NOK1.55 billion (£130 million) depending on future harvest volumes.
Grieg NL has licences for 11 sea sites in Placentia Bay, and is building an on-land smolt facility at Marystown in conjunction with recirculating aquaculture facility (RAS) expert AquaMaof. Three of the licences are approved, three are expected to be approved in 2020 and the rest are in different stages of application.
The project has a long-term annual harvest potential of 30,000 – 45,000 tonnes Atlantic salmon, which would more than double Newfoundland’s current output. Grieg NL’s acquisition will help Grieg Seafood reach its production target of 150,000 tonnes a year by 2025.
Grieg Seafood chief executive Andreas Kvarme said: “For the past few years, we have focused on utilising our existing licences with success. This year, we will reach our target of 100,000 tonnes. Now we are ready for the next step on our growth journey.
“By developing salmon farming operations in Newfoundland, using cutting-edge technologies at all stages of the production process, we are strengthening our position as a global leader in sustainable salmon farming.”
Kvarme said Grieg Seafood already had a position in the fast-growing US market through its operations in British Columbia, and the acquisition pf Grieg NL “significantly strengthens our US market exposure and opens up for synergies with existing operations”.
Although the companies share the Grieg name and have other commonalities, they have until now been separate entities.
The Newfoundland project was initiated by Grieg Kapital AS and Per Grieg Jr in collaboration with local partner Ocean Choice International Ltd in 2014. Grieg Kapital AS is owned by the majority owner of Grieg Seafood, the Grieg Group. Per Grieg Jr is chairman of Grieg Seafood.
Grieg NL is owned by Grieg Kapital AS (39%), Kvasshøgdi AS (39%), Ocean Choice International Ltd. (OCI) (19.5%) and Knut Skeidsvoll (2.5%).
Grieg Seafood has agreed to acquire 99% of the shares of Grieg NL and has an option to acquire the remaining 1% of the shares, which is retained by OCI.
The Norwegian company will make an upfront payment of NOK620.5m for Grieg NL, more than a third of which will be settled through the issuance of new Grieg Seafood shares to the sellers.
NOK264 of the upfront payment is for the work that Grieg NL has done in the project so far, including licences with harvest capacity of 15,000 tonnes (at NOK 17.6 per kilo).
There will be further “milestone” payments of NOK43 per kg for annual capacity from 15,000-20,000 tonnes and NOK55 per kg for annual capacity from 20,000-33,000 tonnes. These could amount to NOK930m.
Similar to Norway
In a statement, Grieg Seafood said Placentia Bay area had favourable biological conditions for salmon farming, with a temperature profile is similar to its Norwegian operations.
Fluctuating temperatures in the water can occur in Newfoundland, with low temperatures in the winters and a recent incident of high summer temperatures in another part of the island.
It plans to use 40-metre-deep pens and underwater feeding to reduce risk related to super-chilled or potential warm water.
The company will also implement its strategy of using larger post-smolt (500g-plus) in the region, increasing robustness of the fish and reducing time in the sea to potentially comprise only one winter.
The freshwater RAS facility is planned to include a hatchery, a smolt facility and three post-smolt modules with potential annual capacity of 7,000 tonnes upon completion.
Grieg said the Placentia Bay area is highly isolated from other salmon farmers in the region, adding that long distances and low interconnectivity between sites lower risk of biological contamination between sites.
The farming licences require sterile salmon.
Stig Grimsgaard Andersen, chairman of Grieg Kapital AS, said: “We are fast approaching the initial smolt and seawater production phase.
“We are therefore glad to hand the reins over to an organisation with exceptional operational experience, financial capacity and scale to take full advantage of this opportunity.
“Our confidence in the viability and potential of this project is even further strengthened with Grieg Seafood at the helm and we are very happy to retain exposure to and participation in this project through our continued ownership in Grieg Seafood ASA.”