Benchmark have today announced 2 acquisitions in the aquaculture segment which offer considerable synergies across the Group, notably in the fast growing Breeding and Genetics division. At a stroke Benchmark have satisfied their aim of diversifying into fish species other than Salmon.
They are buying 100% of Akvaforsk Genetics Center AS (“AFGC”), a Norwegian aquaculture genetics and research business, and 80% of Akvaforsk Genetics Center Inc. (“Spring Genetics”), which is a tilapia genetics and breeding business based in America. Both targets are debt free.
The combined initial consideration is payable solely in cash totalling NOK 140m (c. £11.0m), comfortably satisfied from existing cash balances (stated to have been £31m as at June 30th). The remaining 20% of the issued share capital of Spring Genetics is subject to a put/call option which is automatically exercised in 2022 at a price determined by an earn-out formula linked to its sales. The maximum deferred consideration is capped at NOK 60m (c. £4.7m) and not payable until 2022.
Our immediate thoughts are that buying these companies gives Benchmark:
- An enhanced position as a leader in global aquaculture, having already been number two in salmon breeding and genetics
- New customers across new geographies and fish species, particularly the large and rapidly growing tilapia sector
- The ability to build their offering of products and services for additional farmed fish species
Investors are told that ‘strong performance’ continues in Breeding and Genetics, and that there has been a ‘substantial recovery’ for sales of Salmosan in Chile. The former item is encouraging and relevant to these deals, as it shows both the rapid integration of the last major acquisitions (Salmobreed and Stofnfiskur) and enhanced sales from combining offerings under Benchmark management (‘1+1 =3’).
We shall seek more detail on the acquired companies before adjusting our forecasts, but there should be a positive impact on immediate earnings from converting cash (with a nominal yield) into assets that the Company expects to be earnings accretive in the next year. Of more significance, we think, is the Group’s continued execution of its plans and ability to acquire quality assets in the face of industry competition.