Cermaq ASA : Cermaq recommends against the voluntary offer from Marine Harvest

Urges shareholders to await potential alternative solutions

The Board of Directors of Cermaq has in accordance with the Norwegian Securities Trading Act § 6-16 considered the offer document from Marine Harvest. The Board has unanimously decided upon a recommendation to the company's shareholders not to accept the offer, which today has a value of approximately NOK 105 per share. The Board maintains its previous statements that neither the underlying value of Cermaq nor the synergies that could have been realized through a combination are reflected in this offer. It is further considered most unfortunate that the acceptance level again is set at 33.4%. The Board and management of Cermaq have made good progress in relation to the alternative processes that are ongoing to demonstrate the value of the company and expect to present this before the shareholders need to decide upon the current offer from Marine Harvest.

This statement is provided by the Board of Directors of Cermaq ASA («Cermaq») in accordance with the Norwegian Securities Trading Act of 2007 § 6-16, in connection with the voluntary offer from Marine Harvest ASA («Marine Harvest») to acquire all outstanding shares in Cermaq as described in the offer document dated 5 June 2013.

Please refer to the offer document published by Marine Harvest for a full description of the offer.

Cermaq considers alternative strategic solutions

Cermaq supports a continued consolidation of the farming industry in selected geographical areas and considers that a combination of Marine Harvest and Cermaq could be value creating for the company's shareholders provided an optimal integration and a fair valuation of the company's shares. The current offer does not meet those requirements. 

The Board of Directors in Cermaq has previously communicated its commitment to consider other value creating transactions as alternatives to the offer from Marine Harvest to demonstrate the values of the company. Cermaq has made good progress in alternative processes and has an extensive dialogue with parties interested in different parts of the company's assets, such dialogue also including a full sale of EWOS. The Board's clear objective is to present the result of these discussions prior to the date shareholders must decide upon the current offer from Marine Harvest.

The Board of Cermaq therefore strongly encourages the company's shareholders to refrain from a final evaluation of the offer from Marine Harvest until such clarification of alternative transactions is presented. The company's efforts in providing alternative solutions may be compromised to the extent shareholders decide to provide pre acceptances to Marine Harvest.

The offer does not reflect the underlying values in the company or the synergy potential in the transaction

The offer from Marine Harvest represents 8.6 shares in Marine Harvest in addition to NOK 53.25 per share in Cermaq in cash. At the time of the launch, the value of the offer was estimated to NOK 107 per share. The value of the offer has since been reduced and is today approximately NOK 105 per share, being broadly the same level as the potential offer that Marine Harvest presented in its press release 30. April 2013. 

The Board considers this offer to be significantly below the underlying value of Cermaq's operations and market positions. In its evaluation, the Board has amongst others considered the pricing of companies that are comparable to Cermaq's various operations as well as acquisitions and other transactions within the aquaculture industry.

The Board believes that a combination of the two companies could create significant synergies. The potential value creation will, however, as per the current offer from Marine Harvest, not in a sufficient manner benefit Cermaq's shareholders. This evaluation is both due to the price level of the offer as well as the fact that only approximately half of the consideration will be made in shares in the combined company.

Based on statements from Cermaq's largest shareholder, it is considered unlikely that Marine Harvest will achieve full ownership control in Cermaq. In such a situation it will not be possible to realize the full synergies and value creation potential of a combination. The part of the consideration provided in shares in Marine Harvest will therefore have a lower value for Cermaq's shareholders.

Cermaq has through extensive contact also with the company's private shareholders received clear feedback that the current offer is not considered as satisfactory. This feedback provides additional support for the Board's recommendation. 

The Board's conclusion with respect to the value of the offer is also supported by ABG Sundal Collier Norge ASA («ABGSC»), who is engaged as Cermaq's financial advisor in relation to the offer. ABGSC on 10 June 2013 provided its assessment with the conclusion that the offer is inadequate from a financial point of view. ABGSC's fairness opinion is enclosed with this statement.

On 31 May, Cermaq also retained Deutsche Bank as financial advisor in addition to ABGSC.

The offer includes a very limited take-over premium and is presented at a most favorable time for Marine Harvest

Based on the closing share price of Marine Harvest at Friday 7 June 2013, the offer includes a bid premium (dividend adjusted) of only approximately 17% compared to Cermaq's share price at 4 April 2013, the day before the Copeinca transaction was announced, and only approximately 6% compared to Marine Harvest's own indication of what the share price of Cermaq would have been at 30 April 2013 if the Copeinca transaction had not been announced. This is significantly below the premium levels normally observed in take-over situations. The Board does not consider the calculations of acquisition premiums presented by Marine Harvest in the offer document as representative for the realities.

The Board would also like to comment that the share price ratio between Cermaq and Marine Harvest at the time of Marine Harvest's first announcement of a potential offer (30 April 2013) had not been at a lower level (and hence at a more beneficial level for Marine Harvest) since April 2011.

High probability for delayed payment

The offer document does not state at what time settlement of the offer can be expected to be made. The stock exchange notification dated 6 June informs, however, that settlement is expected in July 2013. Should necessary competition approvals be delayed, Marine Harvest may, in accordance with the offer document, be able to wait until 30 December 2013 prior to making a final decision whether to complete the transaction.

The Board has obtained an external legal evaluation of the above matters in which it is considered less likely that Marine Harvest will be able to comply with its intention for payment of the proceeds in July, as stated in the stock exchange notification dated 6 June.

Shareholders that choose to accept the offer may therefore risk a significantly later payment than indicated.

Marine Harvest holding negative control may adversely impact Cermaq and its shareholders
  
The Board considers it most unfortunate that the acceptance level again is set at 33.4%. Through a controlling minority position, Marine Harvest may negatively influence Cermaq's future strategic flexibility and block value creating strategic solutions, including, but not limited to, mergers, demergers, share issues and capital decreases, and at the same time such acceptance level contribute to create a very uncertain situation for the company and its employees. This may reduce values for other shareholders.

The Board also is concerned to have as shareholder with negative control one if its major competitors, as the objectives for such an owner may be contrary to the company's and the other shareholders' interests.

Consequences for the company's business

There has been no contact between Marine Harvest and the Board or Management of Cermaq to discuss a possible integration between the two companies and a further organization of the combined businesses. Cermaq's evaluation of possible consequences of the offer is therefore based on the relatively limited information provided by Marine Harvest in the offer document.

Briefly summarized, Marine Harvest does not seem to plan the closing of any of Cermaq's facilities, but it is also stated that changes in the Cermaq organization («with legal, financial or employment related consequences») cannot be ruled out. The Board of Cermaq will, however, emphasize that the offer document from Marine Harvest underlines that the company has not made any detailed evaluations of the economies of scale or other synergies that can be realized through a business combination. A potential comprehensive analysis from Marine Harvest with respect to the completion of such integration may therefore include more significant consequences for Cermaq's businesses than as presented in the offer document.

Conclusion

Based on the above, the Board of Directors unanimously recommends that the shareholders in Cermaq reject the offer from Marine Harvest.

Chairman of the Board of Directors Bård Mikkelsen owns 3.000 shares in Cermaq while the board members Rebekka Glasser Herlofsen, Åse Aulie Michelet and Jan Helge Førde own 5.000, 4.000 and 227 shares in Cermaq respectively. CEO Jon Hindar owns 3.200 shares in Cermaq. Neither Cermaq's CEO nor the above mentioned board members will accept the offer from Marine Harvest for their shares.

 

For further information please contact:

CEO Jon Hindar          ph. [phone]  mobile: [phone]

CFO Tore Valderhaug  ph. [phone]  mobile: [phone] 

 

About Cermaq - Cermaq is an international group of companies with activities in fish farming, production of salmonid feed and research in aquaculture. Cermaq has operations in Norway, Chile, Canada, Scotland, the main geographic regions for salmon and trout farming, and in Vietnam. Through its business unit EWOS, Cermaq ranks as the world's largest producer of feed for salmonids. The business unit Mainstream is one of the world's leading farming companies of salmon and trout. The group had sales of around NOK 11.8 billion in 2012. Cermaq is listed on the Oslo stock exchange with ticker code CEQ. www.cermaq.com

This information is subject of the disclosure requirements acc. to §5-12 vphl (Norwegian Securities Trading Act)

ABGSC fairness opinion

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Source: Cermaq ASA via Thomson Reuters ONE

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