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Regin Jacobsen: Bakkafrost is looking forward to working with the SSC management team to continue to enhance performance.
Regin Jacobsen: Bakkafrost is looking forward to working with the SSC management team to continue to enhance performance.

The Faroe Islands’ biggest salmon farmer, Bakkafrost, has signed a binding agreement for the acquisition of 68.6% of the Scottish Salmon Company Plc, it said in an Oslo stock exchange announcement today. It follows a strategic review initiated by SSC with a view to selling the company.

Successful acquisition of the majority stake from Northern Link will trigger a mandatory tender offer for the remaining 31.4% of the shares in SSC. The agreed acquisition price of NOK 28.25 per share values SSC at DKK 4,351.9 million (£516m).

Bakkafrost chief executive Regin Jacobsen said: “Bakkafrost’s journey has been characterised by delivering industry leading growth and profitability combined with a focus on shareholder value creation.

Attractive aquisition

“The Scottish Salmon Company represents an attractive acquisition at this juncture providing exposure to the attractive and premium Scottish salmon farming region with potential for synergies and transfer of best practices.

“The entire Bakkafrost team is looking forward to working with the SSC management team to continue to enhance performance of the business and drive value in the years ahead.”

Bakkafrost said the strategic rationale for the acquisition includes:

  • Giving Bakkafrost access to the Scottish farming region which has Scottish provenance products priced at a premium to the market
  • Creating a combined differentiated global leader in premium salmon with dual exposure to both Faroe Islands and Scottish premium salmon
  • Positive diversification of Bakkafrost’s operations from a pure play Faroe Islands company to a presence in two attractive salmon farming markets while remaining focused on both developed markets and premium products.
  • Potential for material improvement in SSC's profitability over a five-year horizon through realisation of identified synergies, transfer of best practices and a targeted investment programme. Bakkafrost expects to generate synergies in three key areas mainly related to feed and procurement, sales cooperation and SG&A and overhead savings.

Fixed-cost efficiency

In terms of feed and procurement, Bakkafrost said it fish feed with a significantly higher marine index compared to industry feed. Supplying feed to SSC would result in fixed cost efficiency at Bakkafrost feed facilities through intercompany sales of higher quality feed to SSC.

Net synergy is estimated at DKK 1.2 per kg of feed, equating to annual synergies of approximately DKK 70mm from 2022 onwards (~NOK2.6 / kg of SSC harvested salmon).

Referring to sales, Bakkafrost said both it and SSC market premium salmon and brands that obtain a significantly higher price due to provenance and product differentiation. Both companies plan to drive efficiencies by coordinating sales efforts going forward taking advantage of relative distribution strengths in global markets.

Leaner structure

A leaner head office structure in Scotland, through discontinuing the listed functions of SSC, is also planned.

SSC chief executive Craig Anderson said in a statement: “The board of SSC considers this offer to be in the best interest of all shareholders as it realises the material value that has been created after nine successive quarters of growth. 

“The board initiated the independent strategic review in order to assess options to realise value and deliver future growth from the business. The review has been successful in terms of the volume and quality of the companies that have participated in the process, and has resulted in this acquisition to create a major global salmon farming business.  

“I’m proud of the way the SSC team has conducted itself under my tenure, and they have all contributed to building a highly successful business that has ultimately become a compelling investment opportunity for Bakkafrost. The management team will now work closely with the new owners of the business to understand its strategic vision and implications for all SSC stakeholders.”

SSC had a harvest of 29,913 tonnes in 2018, an 18,463 tonnes harvest in H1-2019 and has total harvest capacity of 50,000 tonnes. The company generated an EBITDA of £56.7m in 2018 and £35.7m in H1-2019.