Seafood has been repeatedly identified by studies as one of the most important sources of food that will need play a bigger role in feeding the growing global population.
Roughly 2 percent of humanity’s calorie intake and 15 percent of our protein comes from the oceans, which cover a little over 70 percent of the Earth’s surface – this imbalance has to be readdressed in a sustainable way if mouths are going to be fed, experts have frequently warned.
Part of the equation involves rehabilitating ocean fisheries through conservation, but for the most part, the rebalancing act will have to be fulfilled by farming fish using aquaculture systems. In Norway alone, the 2019 wild salmon catch accounted for only 512 tons of the country’s production, while farmed salmon accounted for a little more than 1.3 million tons.
This is one of several reasons why private equity’s gradual entry into the sector over the past five to seven years, has threatened to develop into a sprint over the last 18 months.
Luxembourg-headquartered GP Diorasis entered the Greek aquaculture space in 2014 through its acquisition of bream and bass producer Bitsakos, in anticipation of a market consolidation which duly occurred because of the country’s debt crisis and resulting bank takeovers, executive director Andreas Sotiropoulos told Agri Investor.
The firm tussled with AMERRA and Mubadala-backed Andromeda Group (into which the pair invested in 2016) for the Nireus and Selonda aquaculture companies in a 2017 auction. Diorasis lost out but was able to acquire 20 percent of the duo’s assets in late 2019 for €50 million, as part of the EU Commission’s approval of the Andromeda merger.
“That first wave of consolidation has largely taken place in Greece. A similar wave will be occurring in Turkey in the near term because they are experiencing a lot of problems Greek producers had 10 years ago,” Sotiropoulos said.
“When the Greek crisis happened, production dropped significantly and that vacuum was filled by Turkey. [Their] expansion was funded in a large part through debt issued in foreign currency and now there’s been a precipitous devaluation of Turkish Lira,” he explained.
Investors interested in the Mediterranean market should be watching Turkey then, if they’re not already doing so.
Headlines in the US, meanwhile, have largely been dominated by Atlantic Sapphire’s land-based recirculating aquaculture system project. The company completed its first commercial harvest in September having listed on a public exchange in May – a trend replicated by RAS operators Salmon Evolution and Andfjord Salmon, with AquaCon and Proximar Seafood also announcing plans to list on stock markets.
Greenfield RAS projects have proven particularly attractive to private market investors – Atlantic Sapphire attracted LPs from this group prior to its listing and continues to do so, interim CFO Karl Øystein Øyehaug tells us in an upcoming interview – because the significant start-up capital required satisfies minimum investment thresholds.
RAS also circumvents the environmental and long term operation risks created by escaped farmed fish concerns associated with ocean-based pens, which has encouraged Washington State, Canada and now Denmark to develop plans to ban or limit their use, and does not require chemical pesticides.
PE firms Bregal Partners and Beach Point Capital are two of the most recent to invest in a RAS project, through their participation in a first stage equity financing for West Salmon’s Nevada venture.
There is also evidence to suggest the sector’s midstream assets are in high investor and client demand. Neptune founding partner Thor Talseth told Agri Investor in another upcoming interview that shipping company Aquaship, into which the firm invested in October 2019, has “more than doubled” its EBITDA in the past 12 months.
It would seem no PE investor sitting at the aquaculture investment table will go hungry any time soon.