Neptune exits krill oil manufacturing, distribution with Aker deal

11 Aug 2017

Neptune has concluded an agreement whereby Aker BioMarine has acquired Neptune’s krill oil inventory and IP for $34 million and that will see the company exit its bulk krill oil manufacturing and distribution activities.

Neptune exits krill oil manufacturing, distribution with Aker deal

Neptune has concluded an agreement whereby Aker BioMarine has acquired Neptune’s krill oil inventory and IP for $34 million.

“This transaction marks an important step in Neptune’s next phase of development. Neptune believes strongly in the health benefits that krill oil provides and will remain actively involved in this sector via our investment in Acasti Pharma Inc. and also through finished form soft gel capsules from our Solutions Business. The proceeds from this transaction allow Neptune to accelerate its efforts to position the company in attractive growth segments such as cannabis oil extraction, as well as support further acquisitions consistent with our strategy. In the last two fiscal years we have significantly grown revenues and improved the bottom line. We are excited about the opportunities that this transaction will enable for the future and the value creation for our shareholders on a long term basis,” said Jim Hamilton, President and CEO of Neptune.

“Neptune has made a strategic decision to withdraw as a bulk krill oil supplier, while Aker BioMarine wants to increase investment in the category, so this agreement is a perfect fit for both parties. This acquisition will allow us to increase investments in science and product innovation, sustainable krill-harvesting practices, and marketing support for our customers, which in turn will build excitement and accelerate growth in the omega-3 market. Neptune’s customers and products will be integrated into Aker BioMarine, including Neptune’s popular NKO™ brand. These customers will continue to receive the products they are used to and at the same time benefit from the additional products and support Aker BioMarine will offer to drive growth in the omega-3 market," said Matts Johansen, CEO of Aker BioMarine.

“Earlier this year, we kicked off the Omega-3 Index Project to bring more awareness to the health risks of low omega-3 levels. We also initiated a study to evaluate the effects of krill oil omega-3s on the world’s toughest Army recruits, the U.S. Rangers. These are the types of activities we will continue to move forward with, and now in connection with the NKO brand,” Johansen said. “The marriage of these two brands is significant for the krill oil business. We have only just scratched the surface of the potential of krill oil and look forward to bringing NKO into our brand portfolio that we spent a decade building.”

Neptune will exit its bulk krill oil manufacturing and distribution activities, and support Aker BioMarine with the transition of its customers, krill oil inventory and intellectual property for a total cash consideration of $US34 million. Some of the proceeds will be used to reduce debt with high interest rates and the balance will be allocated to innovation projects, such as the Green Valley medical cannabis oil extraction project and to acquisitions, in line with its growth strategy.

The Sherbrooke facility is not part of the transaction and the company is now exploring potential alternatives for its use through the development of unique extractions targeted towards high potential growth segments. While a small team of people will be retained to continue work on special projects including the medical cannabis project at the facility, a large number of employees (approximately 50) will see their employment end as part of this transaction.

The Biodroga acquisition completed in January 2016 was transformational for Neptune, and provided a new platform for growth and diversification, the company said, noting also that, in recent months, the Solutions Business was strengthened with different initiatives to support its next growth phase headlined by its MaxSimil product line.

As for Neptune’s involvement in krill oil, it will continue to offer market ready finished products, such as its krill oil soft gel capsules via its Solutions Business in partnership with Aker BioMarine. Finally, Neptune said it remains committed to its investment in Acasti Pharma, which the company believes holds strong potential.

“One of the key factors of this transaction for Neptune is that it will benefit from a stronger financial position. Considering high interest debt reduction and new borrowing capacity to be negotiated, we intend to focus on potential acquisitions and the medical cannabis oil extraction opportunity. The area of focus for potential acquisitions will be specialty ingredients, brands and the solutions business, which our management team intends to pursue vigorously. We are fully aware that this transaction will affect many of our employees and we would like to thank them for their hard work and dedication,” concluded Hamilton.