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$9.6 billion in IPOs planned for coming aquaculture boom in Chile

From Bloomberg News: Australis Seafoods SA raised about $70 million in June in the third initial public offering by a Chilean salmon farmer in six months as the industry rebounds from a virus that cut output by 39 percent.

Australis, which put its first fish cages into the sea in 2008 when the local industry was reeling from an outbreak of infectious salmon anemia, plans to sell 187 million shares, or a 13 percent stake, to help finance a more than doubling of production, Chief Executive Officer Andres Saint-Jean said.

 				Carlos Odebret, the general manager of Chilean salmon producers association SalmonChile, said the industry’s outlook is positive after the fishing sector took a huge hit by the ISA virus between 2007 and 2009.  (Courtesy of SalmonChile)

Carlos Odebret, the general manager of Chilean salmon producers association SalmonChile, said the industry’s outlook is positive after the fishing sector took a huge hit by the ISA virus between 2007 and 2009. (Courtesy of SalmonChile)

“We were born swimming against the current, gathering experience from the industry and taking care of its weaknesses,” Saint-Jean said in an e-mailed response to questions on June 6.

The sale follows Cia. Pesquera Camanchaca SA’s $224 million IPO in December and Empresas AquaChile SA’s $374 million share sale last month. The industry is leading a record year of IPOs in Chile to replenish stocks lost to the virus and meet rising salmon demand in emerging markets such as Brazil.

Camanchaca’s shares have fallen 9.8 percent since its December IPO compared with a 2.8 percent decline by Chile’s benchmark index. AquaChile retreated 0.7 percent since its May 19 share sale while the index rose 0.1 percent.

In all, Chilean companies plan to raise as much as $9.6 billion through the end of next year from IPOs and subsequent offerings, according to Santiago-based brokerage IM Trust SA. Seven companies may make their trading debuts this year, topping a record five IPOs in 2005, IM Trust said.

Economic Growth

South America’s fifth-largest economy may grow as much as 6.5 percent this year, the fastest pace in more than a decade, according to central bank forecasts published April 4

After the 2007 ISA virus outbreak, Chile’s production of Atlantic and coho salmon and trout fell from a 2008 peak of about 700,000 metric tons to 429,000 tons last year, according to data from Australis’ IPO prospectus.

Since then, new rules covering distances between farms and fallow periods, for example, helped reduce reported cases of the virus to six this year from 160 in 2008, according to data from industry regulator Sernapesca.

Chile may increase its output of Atlantic salmon, the variety most affected by ISA, to 300,000 tons by 2013 from 120,000 tons in 2010, according to June 1 report from Chardan Capital Markets. Production of Atlantic salmon peaked at almost 400,000 tons in 2008.

Australis plans to spend $274 million to increase annual salmon production to 80,000 tons by 2015 from an estimated 32,000 tons this year, Saint-Jean said.

Salmon Industry Recovery

The prospect of a recovery in Chile has helped push down international salmon prices this year, according to UBS AG. The price of Norwegian exported fresh salmon has fallen 17 percent year-to-date after a 41 percent increase in 2010.

“There is concern that a steep Chile recovery may impact pricing, making it less profitable than some of the farmers had initially hoped,” said David Kerstens, a London-based analyst at UBS, which follows Norwegian salmon farmers.

Demand from new markets such as Brazil may help counter the supply effect on prices for now, he said.

Only Chile can increase supply to meet growing demand by doubling capacity in the coming years, said Eric Conrads, who helps manage $12 billion in emerging markets stocks at ING Investment Management in New York, including salmon producers.

The salmon farmer IPOs are a positive for Chile in the longer term, said Adam Kutas, who oversees $4 billion in Latin American shares for Fidelity Investments.

“It’s bringing a very key industry back to profitability and stability after going through several tough years,” Kutas said in a June 7 telephone interview. He declined to comment on whether he would buy Australis shares.

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