Cermaq acquires the Chilean company Cultivos Marinos Chiloé

Christian Pérez

According to Cermaq ASA, as a consequence of lower prices and increased production, Cultivos Marinos Chiloé S.A. (CMChiloé) has over the last year faced a challenging financial situation. The shareholders have therefore considered different solutions to secure the future development of the company, which has led to discussions and finally the agreement with Cermaq.

"The acquisition of Cultivos Marinos Chiloé is important to support Cermaq's growth ambitions in Chile", says Cermaq's CEO Jon Hindar in a comment. "We currently observe a challenging market for most farming companies, but we are convinced that a continued increase in the global demand for salmon will strengthen the industry's profitability. The access to more capacity in one of the most interesting global salmon areas is therefore of the utmost importance for Cermaq", Mr Hindar continues.

"This transaction contributes to secure control over more production areas and will over time reduce the group's biological risk and total cost", Mr Hindar continues. "Even if EWOS already is the company's main supplier of feed, the transaction secures the sales volume going forward as well as reduces the capital employed and credit risk related to this customer, Mr. Hindar concludes.

Summary of the transaction • Cermaq acquires all shares in CMChiloé with an expected closing Friday 5th October 2012. • The transaction increases Cermaq's production capacity by around 32,000 tonnes (gwe) on a normalized basis. Expected sales for 2012 amount to 32,000 tonnes while the volume will fall to 23,000 tonnes in 2013 before increasing again from 2014. • Total sales proceeds reflect an enterprise value of US$ 110 million allocated between shares and repayment of loans, including the company's bank debt. • The transaction will be funded by drawings on Cermaq's current credit facilities. • As a result of the acquisition of CMChiloé, Cermaq's total production capacity within salmon farming will increase to almost 180,000 tonnes. Because the majority of CMChiloé's production in 2012 of approximately 32,000 tonnes (gwe) is sold as value added products, Cermaq's position within this part of the value chain in Chile will be significantly strengthened. • EWOS is already CMChiloé's largest supplier of feed. The transaction will therefore not have significant effects for the Feed business unit, except to secure future volumes, reduce credit risk and generally improve capital employed.

The transaction Cermaq acquires all shares in CMChiloé from Inversiones Tocoihue Limitada, Inversiones Metahue S.A. and Inversiones y Asesorías e Inversiones Pualo Limitada. In addition the transaction includes acquisition of minority equity interests held by Inversiones Coipue Limitada and Inversiones Metahue S.A. in CMChiloé's subsidiaries Alimentos Marinos Chiloé S.A., Pesquera Popetán Limitada and Productos Marinos Mardim Limitada. The transaction also includes certain assets held directly by Mr. Francisco José Lopez Herrera. • Total sales proceeds reflect an enterprise value of US$ 110 mill allocated between shares and payment of loans, including the company's bank debt. Payment of the shares and loans, adjusted for a withheld payment of US$ 4 million, in total US$ 106 million (approximately NOK 615 million) will be made on or shortly after the closing date, which at the latest will be 5th October 2012. • The company will be included in Cermaq's accounts as from fourth quarter 2012. • The total proceeds of shares and loans will be financed by current credit facilities in Cermaq provided by the group's relationship banks. • There are no other conditions or requirements for approvals from any authorities or other stakeholders. • Apart from any payment of the withhold proceeds of US$ 4 million, there are no agreements in favor of CMChiloé or Cermaq group's leading employees or board members as a result of this transaction.

Description of Cultivos Marinos Chiloé S.A (CMChiloé) • CMChiloé is a medium sized farming company with production activity in region Los Lagos and Aysén. The company has further 12 own smolt facilities and two processing plants with value added product capacity. Out of the total production in CMChiloé, value added products account for more than 90 percent, including smoked salmon that accounts for around 16 percent of total production. • The company's farming capacity is in the range of 32,000 tonnes per year (gwe). In 2011 the company sold 15,400 tonnes, while sales of around 32,000 tonnes are expected for 2012. Total sales in 1st half 2012 were approximately 12,200 tonnes. • Companies controlled by Mr. José Lopez have until closing of this transaction owned 95 percent of CMChiloé while the current managing director, Mr. Ricardo Purcell, has owned the remaining shares. • CMChiloé controls a total of 29 licenses, out of which 20 in region Los Lagos (X) and nine in region Aysén (XI). Except for six licenses that are rented from other companies, the remaining licenses are owned by the company. • In addition to the existing production, CMChiloé has applied for four new licenses in region XI and 58 licenses in region XII. There is no knowledge as to if and when such applications may be approved. • By the end of second quarter 2012 there are approximately 1,500 employees in CMChiloé, out of which around 50 percent within the company's processing and value added product plants. • The company is today headed by Managing director Mr. Ricardo Purcell and a management team of five persons. • The main shareholder, Mr. José Lopez, has until the closing of the transaction with Cermaq been the Chairman of the Board of Directors in CMCh.   Financial key figures for CMChiloé

Impact of the transaction for Cermaq Cermaq's production capacity in Chile will, following the transaction, increase by almost 50 percent and strengthen Mainstream Chile's ability to control neighborhoods where the company is present. The group will be operating in three new neighborhoods, out of which two will be fully controlled by the combined entity. Balancing the company's operations between all three regions and control of neighborhoods is one of the four cornerstones in Cermaq's strategy for sustainable farming operations in Chile.   The transaction will increase the group's activity within value added processing as 92 percent of CMChiloé's production is supplied as portions, filets and smoked salmon to the group's customers. This will support Mainstream's strategy to increase the business area's product flexibility.   The transaction is expected to provide a number of synergies in the combined farming operations in Chile through increased value added processing, improved capacity utilization and by combining administrative functions. Further information about estimated synergy potential may be announced at a later stage.   Apart from the above overview of financial key figures in CMChiloé, further information as to the impact of the acquisition on Cermaq's total assets and liabilities will be provided as part of the group's presentation of its third quarter 2012 results.