Israel Corp takes 18 percent slice of AKVA, steps deeper into aquaculture sector
Klepp, Norway-based aquaculture services and equipment provider AKVA Group ASA has confirmed Israeli investment company Israel Corp. has acquired an 18 percent stake in its business.
AKVA and Israel Corp. entered into an agreement on 29 September, 2021, that was expected to see the latter acquire a 15 percent share of the company. This investment was be completed through a private placement of 3,333,430 newly issued shares, which would correspond to around 10 percent of the current outstanding shares in AKVA, as well a minimum purchase of 2,166,730 existing shares – all at a price of NOK 96.50 (USD 11.54, EUR 9.90) per share.
While Israel Corp’s maximum ownership of AKVA was not allowed to exceed 19.99 percent, the maximum number of shares that it acquired was to be determined by Israel Corp. at its sole discretion.
Following the expiry of the offer’s acceptance period, it has been verified that Israel Corp. acquired 3,266,762 shares.
Subject to and following completion of the offer and the private placement, which is expected to be considered by shareholders in an extraordinary general meeting to be held on 20 October, 2021, Israel Corp. will accordingly hold in aggregate 6,600,192 shares in AKVA, representing a total 18 percent of the shares and votes in the company.
Egersund Group AS will continue to hold the majority ownership in AKVA after completion of the offer and the private placement.
Assuming that the private placement is approved by the extraordinary general meeting, settlement of the offer is expected to take place on or about 22 October, 2021. Shares tendered and accepted in the offer will remain blocked until settlement or cancellation of the offer. DNB Markets, a part of DNB Bank ASA, is acting as financial advisor and Advokatfirmaet BAHR AS is acting as legal advisor to Israel Corp.
The agreement between AKVA and Israel Corp. will also see the two parties partner in attracting investments for land-based projects that incorporate AKVA solutions and technology. They expect to contribute USD 10 million (EUR 8.5 million) each to the platform or to land-based aquaculture projects worldwide, with the goal of raising further commitments from co-investors and partners to reach a total of up to USD 100 million (EUR 85.6 million).
Israel Corp., based in Tamra, Israel, was founded in 1968 by Israel’s government as a means to attract foreign investors into domestic economic development projects. In 1999, Idan Ofer, the founder of Eastern Pacific Shipping, purchased a majority stake in Israel Corp., and led investments into the fertilizers, specialty chemical, refining, and petrochemical sectors under the banner of the ICL Group. In 2015, Ofer spun off several of Israel Corp.’s other holdings into Kenon, which trades publicly on the New York Stock Exchange.
At one point Israel Corp. was the largest public holding listed on the Tel Aviv Stock Exchange, but the stock has lost 60 percent of its value since it was first listed in 2010, and now has a market cap of USD 3.1 billion (EUR 2.7 billion), though ICL, which is 45 percent owned by Israel Corp., is among the top-ten highest-valued companies on the board, with a cap of USD 16.4 billion (EUR 14.1 billion). Israel Corp. reported a net loss of USD 173 million (EUR 148.4 million) in 2020, which it blamed on a fall in economic activity related to the COVID-19 pandemic. It recorded a USD 158 million (EUR 135.6 million) net gain in 2019.
In 2019 Israel Corp. announced an updated business strategy that would see it revert back to its “natural purpose,” according to the company’s website, “as an active investment company with solid business foundations.” The strategy would focus on “making new investments in high-quality companies in various industries … all for the purpose of maximizing value to our shareholders.”
“We need to transform into something that creates better opportunities for shareholders, provides clarity on value for assets like ICL, provides opportunities for growth on global markets for the new enterprises that we separate,” Israel Corp. then-Chairman Amir Elstein told the Financial Times at the time.
Soon after the announcement, Yoav Doppelt, who was the founder and CEO of the Ofer Group’s private equity fund where he was involved in numerous investments in the private equity and technology sectors, was named the CEO of Israel Corp.
In a 2019 presentation, Israel Corp. said it planned to expand its portfolio through new investments of between USD 350 million and USD 500 million (EUR 300.3 million and EUR 429 million) with a focus on the food and food-tech, agriculture, healthcare, and industry 4.0 sectors. The firm said it would focus on sectors “that ride on the global megatrends” and that had “a positive ESG [environmental, social, and corporate governance] profile.”
The company said it is banking on its shift from being a passive holding company to an investment firm to bring it better returns. Its “initial investor thesis” outlined a strategy of acquiring established businesses with highly experienced management and global reach, and then to integrate innovative approaches into their holdings’ business models “to create disruptive plays” via either a shift or expansion of product porfolios or new markets, improving processes, or continued same-sector acquisitions.
In targeting food and food tech, Israel Corp. identified new consumer preferences such as health awareness, conscious eating, on-demand availability, and sustainability as “driving to convergence of the food, agriculture, and healthcare industries.” It named challenges such as a growing global population and increased demand for food, a loss of consumer trust in the products they eat, and large-scale food waste as issues it could possibly address through its investments. And it said consumer preferences shifting from fresh food and less-processed food, while maintaining convenience, would drive its food-sector investments.
In its AKVA investment prospectus, Israel Corp. also noted consumers are “willing to pay a premium for salmon versus other proteins,” due to its health benefits and its lower carbon footprint. It predicted a volume increase of one to two million metric tons of salmon sales by 2030, with “traditional growth and new emerging technologies [having] the potential to cover underlying demand.”
“Innovation [will be] required to maintain and grow existing volume,” it said.
It believes the aquaculture sector can achieve a 5 to 10 percent increase in conventional salmon production “driven by shorter production cycles and lower mortality due to [less] time in sea,” and pointed both to better treatment and prevention of sea lice issues and the potential of both Norway’s developmental licenses and the adoption of salmon-farming in new regions as potential growth areas. It also said land-based aquaculture “has a role to play, either as ‘niche’ production or as preferred growth area (dependent on cost competitiveness).”
Israel Corp. called AKVA a leading technology and service provider in the aquaculture sector, with strong research and development capabilities, and a growing digital solutions business that can help to improve the sector’s productivity and reduce its environmental footprint. Israel Corp. further said it believes AKVA is in an “advantageous position” in the land-based sector, “well-positioned to be a leading player in the grow-out space.”
It mentioned AKVA’s contract with Nordic Aqua Partners to provide technology for a 4,000-metric-ton land-based salmon project in Ningbo, China as the highlight of a “solid pipeline of projects in various stages.” However, AKVA’s contract with Nordic Aqua Partners was jeopardized due to the COVID-19 pandemic, according to a 2020 AKVA release. But another project, AquaCon’s land-based farm in Maryland, U.S.A., appears to be on track due to investments from both AKVA and Israel Corp., as well as feed manufacturer and animal health firm Nutreco.
AKVA delivered second-quarter 2021 revenues of NOK 832 million (USD 96.8 million, EUR 82.7 million), a decrease of 3 percent compared with the corresponding period of last year. Its earnings before interest, taxes, depreciation, and amortization (EBITDA) for the quarter was NOK 79 million (USD 9.2 million, EUR 7.9 million), while its net profit amounted to NOK 16 million (USD 1.9 million, EUR 1.6 million). AKVA’s order intake in Q2 2021 amounted to NOK 900 million (USD 104.7 million, EUR 89.5 million), with a backlog of NOK 1.9 billion (USD 221.1 million, EUR 188.8 million) at the end of June.
In 2020, AKVA reported a 3 percent increase in revenue to NOK 3.2 billion (USD 376.9 million, EUR 315.3 million), while its profit climbed by NOK 74 million (USD 8.8 million, EUR 7.3 million) to NOK 91 million (USD 10.8 million, EUR 9 million).
“AKVA group is in a very attractive position for future profitable growth,” AKVA CEO Knut Nesse said in April. “Our strategy outlines a strong organic top-line growth and minimum 25 percent increase in EBIT year-on-year the coming years. My role is to make sure we make the right priorities and execute our innovation and digital agenda to the best for AKVA, our customers, shareholders, and stakeholders.”