Strategic investment in key Chilean market
Benchmark Holdings (BMK) has entered into an aquaculture breeding and genetics Joint Venture with Empresas AquaChile SA (AquaChile), the world’s sixth largest salmon producer. This is a strategic move that cements BMK’s presence in Chile, the second largest global producer of Atlantic salmon after Norway. In 2017 AquaChile was the largest contributor to a Chilean harvest which reached over 580,000 tons, showing year-on-year growth of 15%.The JV is set to be immediately earnings enhancing, contributing £1.8m in adjusted EBITDA in the four-month period to September 2018. It also allows BMK to participate in the market through relatively lower capital investment and at lower risk than making acquisitions or building a facility from scratch.
The deal is to be financed by BMK’s £19m gross equity placing of 34.5m shares at 55 pence per share to fund the cash consideration in two tranches: $7.5m upfront, followed by $8.75m to be paid in December 2018. There is also a shareholder loan of $5.4m from BMK to the JV (matched by AquaChile) which in part refinances debt and provides the JV with working capital.
BMK has opted for market entry through a partnership with AquaChile who seem to us an excellent partner owing to high market share and broad geographic reach. AquaChile reported FY17 revenue of $398m, of which 56% of revenues were associated with Atlantic salmon sales, and produced 45.9k tons of salmon, representing c. 10% of the country’s total production in 2017.
Separately, BMK reports that the Group is trading well across all three main Divisions and is on track to meet full year financial forecasts. Highlights include excellent results from ongoing field trials of BMK’s pioneering sea lice treatment Ectosan and a high level of interest from the Norwegian market.
At this moment we are making no changes to our forecasts, which we will review after the imminent H1’18 results due on 19 June. Until then we retain our current valuation of £521m for the business and believe that BMK presents a unique opportunity to invest in a diverse sustainable aquaculture platform.
Benchmark Holdings is principally engaged in the provision of technical services, products and knowledge that support the development of sustainable food and farming industries. Co.'s reportable segments include: Animal Health Division, which provides veterinary services, environmental services diagnostics and animal health products to aquaculture, and manufactures licenced veterinary vaccines and vaccine components; Genetics Division, which harnesses salmon breeding technologies combined with production facilities to provide a range of high genetic merit ova; and Advanced Animal Nutrition, which manufactures and provides nutrition and health products to the aquaculture industry.
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