* Appeals to biggest shareholder for common sense
* Decision rests with Norwegian govt, which holds 43.5
* Cermaq shares soar 20 pct
* Analysts say fair value much higher
(Adds valuation comparison, analysts, quotes, industry outlook)
By Balazs Koranyi and Ole Petter Skonnord
OSLO, May 2 Marine Harvest, the world's biggest
fish farmer, took its $1.7 billion hostile bid for
state-controlled rival Cermaq directly to Norway's
trade minister on Thursday after the firm's board rejected its
Harvest, controlled by shipping tycoon John
Fredriksen, said it would appeal to shareholders including the
government, which holds 43.5 percent of Cermaq, in its bid to
create a global giant that would be a top player in everything
from feed to processing.
European fish firms are booming as constrained supplies and
the threat of a new epidemic in Chile push fish prices sharply
higher, boosting profits after a difficult 2012 and analysts
said Marine Harvest's offer of 105 crowns per share still looks
"After the rejection, we are now talking to the state
directly, believing that common sense will finally prevail,"
Marine Harvest Chairman Ole-Eirik Leroey told Reuters.
Cermaq rejected the bid, pitched at 22 percent above
Tuesday's closing price of 86 crowns, arguing that it
undervalued the company and unreasonably asked it to drop its
own $730 million bid for Peruvian fishmeal firm Copeinca
Cermaq shares jumped 20 percent to 103 crowns per share on
Thursday, just below Marine Harvest's cash and shares offer, but
analysts said this was probably not yet enough.
Norwegian brokerage Fondsfinans estimates Cermaq's value at
118 crown based on a sum of the parts valuation while
Handelsbanken has a 125 crown target price on the stock.
"We are thus not certain that Marine Harvest will be
successful in securing two-thirds of the shares, on which the
offer is conditional," Fondsfinans said. "In particular, we are
uncertain as to whether the main Cermaq shareholder will accept
settlement in 50 percent Marine Harvest shares."
Cermaq shares traded at a 2014 enterprise value to EBIT
ratio of 6.2 percent before the bid, well below the industry's
7.1 average and Marine Harvest's own 8.
The outcome now rests with Trond Giske, Norway's industry
and trade minister, who controls the shares on behalf of the
state and is known to have an uneasy relationship with
Fredriksen. His ministry said it was following the situation but
would not comment further.
Norway recently eased its ownership rules, allowing firms to
hold up to 40 percent of the Norwegian market and the deal would
increase Marine Harvest's share from about a fifth to around 30
percent, staying well below the maximum.
But although Norway owns controlling stakes in big listed
firms like Statoil or Telenor it has no
tradition of overruling company board decisions.
Global salmon production soared 22 percent last year as
Chile returned to the market after an epidemic devastated its
fish stocks but further growth ahead will be limited to just 2-3
percent a year, pushing fish prices high.
Fish is in high demand as the world's population rises
because it is cheaper to produce and offers higher yields.
Around 68 percent of salmon is edible, above the 45 percent
for poultry, while a 100 kilograms of feed will yield 65
kilograms of fish but just 12 kilograms of pork. Its 31 percent
protein content is also higher than pork or poultry.
Fredriksen, estimated as worth $11.5 billion by Forbes
magazine, is a controversial figure in Norway, particularly with
the centre-left Labour government.
Having traded his Norwegian passport for Cypriot citizenship
for tax purposes, he has been moving many of his companies away
from Norway prosperous oil-based economy with its high wages and
(Reporting by Balazs Koranyi; Editing by Patrick Graham)