Maximizing the Value of Hiddenfjord

Abstract

The aim of this thesis is to develop a strategy for the Faroese salmon farmer, Hiddenfjord, that serves to maximize the value of the company. This thesis estimates the value of Hiddenfjord, and how much the company value increases, when the proposed strategy is implemented. In order to develop the most favorable strategy for Hiddenfjord, a strategic analyses is prepared for Hiddenfjord and the salmon farming industry. The strategic analysis shows that traditional salmon farming is facing several challenges, which could indeed threaten the future growth in production. Farming licenses are running out, and the biological limit for salmon production is nearly reached. Furhermore, global warming is decreasing the amount of suitable fjords for salmon farming; sea lice increase the mortality rate of farmed salmon, and threaten the population of wild salmon; salmon escapes also threaten wild salmon, and is costly for the salmon industry. This thesis shows that land-based salmon farming meets all the current issues facing traditional salmon farming. Land-based salmon farming is not dependent upon farming licenses. This creates huge growth potential in an industry where growth in demand is increasing, whilst growth in supply is decreasing. Land-based salmon farming is not in contact with the sea, therefore it does not threaten the population of wild salmon, as escapes and the spread of sea lice is impossible. The strategic analysis shows that Hiddenfjord’s resources create good conditions for success in land based salmon farming. Land-based salmon farming uses RAS technology (Recirculating Aquaculture Systems), which Hiddenfjord has been on the forefront in developing for years. Moreover, Hiddenfjord has established a brand that consumers pay a price premium for, whilst a price premium is a prerequisite for making land based salmon farming profitable. This thesis concludes that the best strategy for Hiddenfjord, in order to maximize the value of the company, is to expand into land-based salmon production. The valuation furthermore estimates, that Hiddenfjord’s value will increase from DKK 3.856.103.989 to DKK 6.374.449.710 when the proposed strategy is implemented.