Shares in Norwegian salmon farmer Pan Fish leapt as much as 26 percent on Tuesday after it agreed to buy rival Marine Harvest for 1.3 billion euros ($1.6 billion) to become the world's biggest fish farmer.
The stock was up 18.1 percent at 5.15 Norwegian crowns versus on Friday's close, after earlier reaching a 2-1/2 year high of 5.50 crowns. Trading in Pan Fish stock was suspended on Monday when it announced the deal.
On Tuesday Chief Executive Atle Edie left open the potential for a takeover of rival Norwegian fish farmer Fjord Seafood, in which it also bought a 26 percent stake for 1.3 billion Norwegian crowns ($194.8 million) on Monday.
"We haven't bought the shares for fun. We have spoken to the chairman and the CEO but won't comment on a full integration," he said at a presentation.
Lifestyle changes and fears about the safety of poultry with the spread of bird flu have helped push up Salmon prices. In January a kilo of Norwegian salmon sold for 26.75 Norwegian crowns, nearly a 16 percent increase from a year earlier.
The combination of Pan Fish and Marine Harvest would control of 20 percent of global salmon production. But Norway's Fisheries Minister will have to approve the deal. A law limits a single company's ownership of Norwegian fish farms to 25 percent of the market, and any company wanting to operate more than 15 percent has to apply to the ministry for permission.
"This is about politics and about any one company being able to dominate the industry," director-general of seafood markets at the ministry, Mangier Nerheim, said.
Pan Fish has not yet applied for permission, although the deal would give it control of about 20 percent of Norwegian fish farming, he said. A takeover of Fjord Seafood would lift its share near the 25 percent cap.
A Labour-led government, which took power last year, lowered the limit from 35 percent in December.
Analysts say they believe the deal will go ahead. "I think there is a political will to get it through. The government wants to secure a Norwegian ownership of the fish farming industry in Norway," said Nils Oven Kjerstad, an analyst at Alfred Berg.
Dutch Food Company Nitric had built up a 75 percent share in Marine Harvest by buying up fish farms from Norwegian Energy Company Norse Hydro, which sold out in 2001. Tanker group Stole-Nielsen had owned the other 25 percent.
"It was a terrible fuss when Hydro Seafood was sold to Marine Harvest. It is a political point that they want it back," Kjerstad said. Pan Fish CEO Edie said the buyout of Marine Harvest would yield cost savings of around 700 million Norwegian crowns, and the company said it had partly funded the takeover with a private placement of 1.25 billion shares at 4.36 Norwegian crowns each, raising 5.45 billion crowns.
John Fredriksen, Norway's richest man, is the main owner in Pan Fish.
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