The private equity investor Longship sees risk but also notices attractive opportunities in the sector.
Former lawyer Bernt Østhus is a partner in Longship which has invested over EUR 150 million in medium sized companies (SMEs). The return so far is a return to the owners of 3.2 times the investments. Its owned by includes the German insurance giant Allianz and the Norwegian government-owned private equity investor Argentum (amongst others).
“PE, or active ownership fund, is suitable for smaller businesses that are not fit for stock exchange and are usually funded by institutional investors,” explained Østhus.
“It should facilitate so that the companies become more mature, for example for stock exchange listing, or a life without a strong entrepreneur. Further develop the companies’ strategy, preferably from an entrepreneur who has developed it with a strong determination, but without what it takes to take it further,” he added.
“PE runs far more businesses, almost from day to day,” said Østhus during EY’s aquaculture seminar in Bergen Thursday.
Oslo-based Longship is seeks growth segments, which naturally make it easier to increase the activity of the companies they own. Among those they are looking closely are in fish farming.
“As of today there are few PE funds in farming,” he said, before explaing why this is the case. “PE does not like cyclicality and is skeptical of (biological) risks that one cannot control,” he said.
On the other hand, relatively low competition from other PE players, a rapidly maturing industry and the fact that the industry is fragmented and open to consolidation makes it attractive. The supply chain, equipment and services have especially caught PE’s interest.
Fish farming itself is unlikely for PE, due to established ownership, Østhus believes. Processing, feed and pharmacy have traditionally been sweet spots for PE internationally, he noted.
Longship has so far only invested in one player in the aquaculture sector, the RAS operator Nofitech, who specialise in cost-effective solutions.
“In principle, they only supplied to three customers; one in Japan (rainbow trout) and two in Norway, on post-smolt,” he said.
Among Nofitech’s customers is the Austevoll salmon farmer, Erko Seafood.
“I was notified yesterday that 875,000 smolt had been issued in Erko Seafood’s post-smolt facility in Sagvåg, outside of Bergen, Norway. Erko is the most experienced RAS operator, with eight generations in sea, and extremely good results.”
“There are few farmers today who cover their own smolt needs. It is a large investment program here in the years to come, and will be invested in two to four billion a year, he says, adding that the heaviest development in RAS technology is taking place in Asia,” he added.