“There are still opportunities for other synergistic combinations”

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Rabobank’s senior seafood analyst Gorjan Nikolik on Chile’s salmon landscape post-Joyvio/Australis Seafoods’ mega-deal. 

On Monday, Diario Financio reported that China’s Joyvio Group (the food and agriculture investment platform for Legend Holdings) and its co-investor Silk Road Fund finalised the take over bid for the 100% stake in Chilean salmon farmer Australis Seafood.

Largest
The transaction – one of the largest acquisitions in Chile’s aquaculture industry – had its tender offer for 99.838% of the outstanding shares in Australis accepted, valued at over USD 920 million.

Though if anyone would have looked at the Chilean industry pre-2017 – they would have seen some patchy financial performance with recurring problems.

“Except for a couple of exceptions, for a long time, there was hardly any transactions except for the acquisition of Cermaq Chile which sold by the Norwegian government. At the time Mitsibushi bought it, it was seen as a highly risky undertaking. Mitsubishi had a very long term vision and took some risk – and in retrospect, it was a great move,” said Nikolik in a call to SalmonBusiness.

PHOTO: Australis

Low single digits
In Chile today, farmers are harvesting larger fish with lower mortality and lower sea lice levels. Though next year’s growth will be “relatively minor – low single digits,” said Nikolik.

Today Agrosuper and now Jovio have moved into the market and more acquisitions are on the cards. “There are still opportunities for other synergistic combinations,” added the analyst.

Legend Holdings, the Chinese investment which owns Jovio – who in turn now controls approximately nine per cent of Chile’s total salmon output – have considerable resources and interests in their group such as retailers and information technology.

With Australis Seafoods, Jovio is also well placed to provide for an emerging market with a rising middle class (that’ll encompass half of the population by 2030) hungry for new proteins. The acquisition will bring the company a distinguishing factor in China while also ensuring supply and control of prices. Chile also has doubled its salmon exports to China in the last four years.

Chairman of the Board of Legend Holdings Corporation Liu Chuanzhi. PHOTO: Joyvio

Growing protein deficit
And as countries across Asia struggle to contain an outbreak of swine fever – particularly in China which has half the world’s pigs – biological challenges in the animal protein sector will change seafood trade dynamics in the years to come.

Last April, Rabobank released the “Rising African Swine Fever Losses to Lift All Protein Boats” report in which the bank said it expects available global protein supplies to be redirected to China in an effort to satisfy the growing protein deficit.

“The big protein gap in China cannot be filled domestically. Part of the gap will be filled by imports. Not for salmon per se as it’s not a substitute for pork but the rationale for African Swine fever being a driver is indirect – it creates a higher protein demand,” explained Nikolik.

China’s middle class is also set to drive consumption. “China has a very high income elasticity of demand for seafood where the are switching towards higher quality proteins. And culturally they have a considerable appreciation for fish,” concluded Nikolik.