Bergen, Norway-headquartered Grieg Seafood ASA (GSF) has signed share purchase agreements (SPA) for the acquisition of new Canadian salmon farming venture Grieg Newfoundland AS.
Announcing the move that “strongly underpins” its strategy to harvest at least 150,000 metric tons (MT) of Atlantic salmon by 2025, GSF said the Newfoundland project includes exclusivity for salmon farming in Placentia Bay, which has a bigger farmable area than the Faroe Islands.
“For the past few years, we have focused on utilizing our existing licenses with success. This year, we will reach our target of 100,000 MT. Now we are ready for the next step on our growth journey,” Grieg Seafood CEO Andreas Kvame said. “By developing salmon farming operations in Newfoundland, using cutting-edge technologies at all stages of the production process, we are strengthening our position as a global leader in sustainable salmon farming.”
Grieg Newfoundland’s first harvest will be in 2022-2023, and the region is expected to contribute a 15,000 MT annual harvest to Grieg's bottom-line by 2025. The project has a long-term annual harvest potential of 30,000 to 45,000 MT of salmon.
Initiated in 2014 by Grieg Kapital AS and Per Grieg Jr. – chairman of the board of GSF – in collaboration with local partner Ocean Choice International Ltd. (OCI), Grieg Kapital AS is owned by the majority owner of GSF, the Grieg Group. Through the SPAs, GSF acquires 99 percent of the shares of Grieg Newfoundland. It has an option agreement to acquire the remaining 1 percent retained by OCI.
Settlement for phase one of the production plan includes an upfront payment of NOK 620.5 million (USD 66.9 million, EUR 61 million). This includes NOK 264 million (USD 28.5 million, EUR 25.9 million) for the work already carried out by Grieg Newfoundland, including licenses. The remaining amount is related to investments already made in the project.
When phase two is initiated, a further potential settlement of up to NOK 930 million (USD 100.2 million, EUR 91.3 million) is triggered by harvest volume milestones to be reached during the first 10 years of operation following the transaction.
The first milestone payment will be made when the company reaches a planned annual harvest volume of more than 15,000 MT, and the last will be when the annual harvest reaches 33,000 MT.
NOK 250 million (USD 26.9 million, EUR 24.6 million) of the upfront payment will be settled through issuance of new Grieg Seafood shares to the sellers of Grieg Newfoundland. The subscription price for the consideration shares will equal the volume weighted average closing price of the shares in Grieg Seafood over the three days prior to signing. The rest of the transaction will be financed through increased debt facilities.
Grieg Newfoundland currently comprises licenses for 11 sea sites. Of these, three licenses are approved, three are expected to be approved in 2020, and the rest are in different stages of application. It received environmental impact study (EIS) approval in August 2018.
A recirculating aquaculture system (RAS) facility is also included in the project, with construction already underway. This will house a hatchery, a smolt facility, and three post-smolt modules with a potential annual capacity of 7,000 MT.
“The U.S. market is the world’s largest and fastest-growing market for Atlantic salmon, but only one-third of U.S. demand is currently met by North American production,” Kvame said. “We already have a position in this market through our operations in British Columbia, where we have attained significant sales and marketing experience. With close proximity to important markets on the East Coast of the U.S., this acquisition significantly strengthens our U.S. market exposure and opens up for synergies with existing operations.”
Because the Newfoundland sites are exposed to high seas, they will all be equipped with systems for harsh environments. Forty-meter-deep pens and underwater feeding will reduce risk related to super-chilled or potential warm water. OCI will provide harvesting and processing support to the operation.
At the same time, GSF’s post-smolt strategy will be implemented in the region. This is intended to increase robustness of the fish at all stages in the sea and reducing time in the sea to potentially comprise just one winter.
“Grieg Seafood has close to 30 years of experience with fresh water, post-smolt and sea water production of Atlantic salmon. Going forward, we will increase our focus on sustainability, fish welfare, reduction of carbon emissions and responsible farming practices,” Kvame said. “We will bring our best expertise, technology, and knowledge into the development of the Newfoundland region, to ensure that we create value for all of our stakeholders alike: investors, customers, employees, and not least for the local communities in Newfoundland.”
