Salmon Producers are Consolidating – Salmar

Salmon Producers are Consolidating – Salmar
January 24 16:44 2019

Agrosuper closes deal for AquaChile to create world number two in salmon farming (undercurrent news)

The Chilean agribusiness conglomerate Agrosuper announced it has acquired 99.71% of Empresas AquaChile in a deal reportedly worth up to $850m, making it the world’s second largest salmon farmer behind Mowi (formerly Marine Harvest)

Prior to this, both companies signed other deals, with Agrosuper buying Friosur for $229m and AquaChile acquiring Salmones Magallanes for $255m.

Finally, China’s Legend Holding has announced it is moving to acquire Australis Seafoods in a deal worth $880m.

Comments

Previous Brokers analysis showed that consolidation of the smaller players was likely, as companies sought to reduce unit costs by increasing scale.

What is interesting about this acquisition is it’s building scale in Chile, which has had a mixed history in terms of disease and fish welfare. It will be interesting to see if scale brings sustained higher welfare standards?

From a competitive position consolidation could actually be good for Salmar – as it could bring some market discipline and further improve the public perception of the product. They are already the lowest cost producer and they are the first to expand into off-shore farms, so they have little to fear from this deal.

SALMAR $SALM is valued at a 16x PER Next Twelve Month, their Nebt Debt/EBITDA ratio is at <1x which is reassuring in the current market situation.

I expect the company to continue to perform very well in the coming weeks with this consolidation in a market where you only have 5-10 producers in the world.

New Salmon Farming capacities

SALMAR developped a new way to produce salmons by experimenting one of the most advanced “Sea Farm”. CAPEX needed are very high for the 1st farms but should go down significantly for the next ones as cost improvements kick in .

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