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Bakkafrost defends offer made to Scottish Salmon Company minority shareholders

The company is not willing to compromise on full ownership.

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Faroese salmon giant Bakkafrost is defending its offer to Scottish Salmon Company (SSC) minority shareholders to acquire their stakes, describing it as fair.

"The price offered is the same as we paid the majority stake in the company and it was approved and evaluated by the Oslo Stock Exchange," Bakkafrost CFO Hogni Dahl Jakobsen told IntraFish.

In September, the private equity fund Northern Link agreed to sell its 68.6 percent stake in SSC to Bakkafrost for NOK 28.25 (€2.80/$3.10) per share in a deal worth £517 million (€604 million/$670 million).

A third of the consideration was paid in 2,256,470 Bakkafrost shares issued at a price of NOK 500 (€49.50/$54.80) per share. The rest of the transaction was settled in cash.

When Bakkafrost acquired the majority stake in SSC, it had to put a mandatory offer for the rest of the shares, which it did as a legal requirement, Jakobsen said.

The company hopes to fully own SSC and acquire all the shares.

"If we are able to get hold of 90 percent of the shares we will have the option to squeeze out the remaining shareholders," Jakobsen said.

The heart of the controversy

If Bakkafrost is offering all the shareholders at the same price to acquire their stake in SSC, where's the problem?

The problem stems from the fact that Northern Link was paid partly in cash and the rest was issued as shares in Bakkafrost at a discounted price.

One day after the offer, Bakkafrost stock traded higher, and if the synergies between SSC and Bakkafrost were taken into account, then Northern Link did receive better terms because the SSC stock is worth more than the price offered.

However, if Bakkafrost shares collapse, Northern Link will be at risk, because it agreed not to buy or sell any derivative instruments based on its Bakkafrost shares for six months, a move that restricts buy-out or call options to hedge Northern Link's investment in Bakkafrost.

What are the options?

If Bakkafrost is not able to squeeze-out the minority shareholders, it will be left with the choice of increasing the SSC share price offer or under extreme measures, minority shareholders will keep their stake in the company.

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