The start-up doesn’t make any money, but is valued at close to 60 per-cent of the competitor and equipment giant AKVA group

Aslak Berge

How does CageEye’s auditor, Ernst & Young, deal with this issue?

CageEye, or Bluegrove as the start-up company also calls itself, has in the past year made two astonishing acquisitions, of NorseAqua and Sealab. Both times, the settlement has been in shares at the same time as the selling party has committed to buying CageEye shares – at an extraordinary value.

The acquisition method is creative. The valuation up of the company, the method itself, is central. This is an issue that the company’s auditor is challenged on and must decide on.

The role of the auditor is to verify that the financial statements of auditable enterprises are carried out in accordance with applicable laws and regulations.

SalmonBusiness has approached CageEye’s auditor, Amund P. Amundsen, to clarify what assessment methods he uses when there is uncertainty about valuation in the balance sheet. As an auditor, he must be able to stand behind the company’s balance sheet values, in what’s called an impairment test.

Amundsen, who is a partner at Ernst & Young in Trondheim, did not answer our inquiries by email, text or phone on Thursday.

Several other auditors SalmonBusiness has spoken to points to the pricing of comparable companies as a relevant clue for such an impairment test.

CageEye is currently building itself up as a supply company to the aquaculture industry. The company appears to be transaction-driven and has announced several upcoming acquisitions. The management highlights AKVA group in its own business plan as an established competitor for them in this segment.

Source: Bluegrove

Big gap
CageEye has, according to its own valuations, a market capitalisation of EUR 120 million. Three of the last four years, the company has lost money. Last year, the deficit was EUR 2.4 million after a turnover of EUR 0.4 million.

AKVA group, on the other hand, is listed on the Oslo stock exchange, with a market capitalisation of EUR 210 million. In the last three years, AKVA group has delivered an EBITDA between EUR 21.7 million and EUR 24.8 million. In 2019, the aquaculture equipment manufacturer and supplier had a turnover of EUR 284 million.

The gap is large between the underlying values and operations of the two companies.

Basically, there is a high degree of freedom of agreement in unregulated markets. But it’s not completely flexible on valuations. In the real estate market, for example, banks place strict requirements on valuations as a fundament for loans.

The main rule is that an asset shall be written down in the accounts when the balance sheet value of the asset is greater than the “recoverable amount”, and it is not of a transient nature. It is the highest of the value of use and net value to be used for the recoverable amount, the website states.

If there is a need for write-downs, this is recognised as a reduction of the asset in the balance sheet with offset account impairment cost in the income statement. Usage value is the present value of the future cash flows that the asset is expected to generate.

The board of directors of the company shall also act independently and conduct impairment tests of the balance sheet. SalmonBusiness has contacted CageEye Chairman Ivar Strand with questions about this. He has not returned our inquiries.


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