Hofseth BioCare and Sinkaberg-Hansen forms joint venture

The new company will be owned with 51% by Hofseth BioCare and 49% by Sinkaberg-Hansen. Hofseth BioCare Rørvik aim at becoming a leader in the growing market for high value products like pure virgin omega-3.

Hofseth BioCare ASA (HBC) and Sinkaberg-Hansen AS (SBH) have previously entered into a joint venture agreement (the Main Agreement) regarding the establishment of Hofseth BioCare Rørvik AS (HBC Rørvik). The Main Agreement was entered into on 12 October 2011 and approved by the Company’s General Meeting on 26 October 2011.

- We’re pleased to have incorporated this joint venture with a renowned player within aquaculture like Sinkaberg-Hansen. Hofseth BioCare Rørvik will be an important building block in our strategy to expand and take a leading position in the growing market for high value, natural products such as omega-3 oils, says CEO Sjur Jenssen in HBC.

The Company and SBH have now incorporated HBC Rørvik and the new company is under registration with the Norwegian Register of Business Enterprises.

HBC Rørvik aims at becoming a production company that through a new advanced production process will be able to refine high quality fish off-cuts from SBH and the surrounding fishing industry into human grade high value products; pure virgin omega-3 oils, soluble protein hydrolysate products and calcium products with high bioavailability.

HBC Rørvik’s new production facility will be situated next to SBH’s processing facilities and will have exclusive right to buy all fish off-cuts from the SBH group. The new production facility is expected to have a capacity to process around 18,000 tons of raw materials each year when operating at full capacity. The establishment of HBC Rørvik will increase the Company’s processing capacity with almost 150% from 12,500 tons per year to approximately 30,500 tons per year. This will increase the estimated production capacity from approximately 4,900 tons of finished products to around 12,000 tons.

The factory building will be financed by SBH and leased to HBC Rørvik. HBC Rørvik’s investment in equipment is estimated to approximately MNOK 65. HBC Rørvik will pay a fee to the Company based on for certain management and marketing services and use of technology and knowledge.

The factory building at Rørvik will be finalized early January 2013, and that production equipment will be installed during the first and second quarters of 2013. The first sale of products from HBC Rørvik is estimated to take place in the second quarter of 2013.

The products from HBC will be distributed to the relevant markets through a network of distributors and the Company believes that its proposition of sustainability (optimal use of natural resources) and traceability (each product can be traced back to the source) offers an attractive market proposition that will enable the Company to enter into distribution, marketing and sales agreements that will effectively distribute the Company’s products at attractive terms. The Company has already established several important agreements in this respect:

 Exclusive distribution agreement with TSI Health Science LTD from May 2011 for distribution of its salmon oil in the human nutrition market in North America, China, Australia, Japan, New Zealand.

 An exclusive agreement with MRM-US from November 2011 for the sales of the Company’s salmon oil in the health food channel. This agreement is a result of the distributor agreement with TSI and MRM-US will be served through TSI.

 A cooperation agreement with a third party from October 2011 for the sale of the Company’s calcium product in the northern Europe.

 Chr. Olesen has been appointed as the Company’s exclusive agent for the sale of the Company’s products to the Animal and Pet Food market.

These above distributors are medium to very large sized. HBC’s strategy is to select the distributors