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Salmon giant caught on European competition hook as deal nets 36% of Scottish production

MARINE Harvest, the biggest salmon farmer in Scotland, is facing an investigation by European competition authorities after buying a dominant stake in rival Morpol last week.

The deal increases Oslo-listed Marine Harvest's share of Scottish salmon production from 23% to 36%, territory that often triggers objections to perceived market dominance.

The investigation raises the prospect of a repeat of the situation after the three-way merger of Marine Harvest, Pan Fish and Fjord Seafood in 2006, which brought together over 40% of the market and was only accepted on condition that Pan Fish Scotland be sold.

This was demanded not by the UK authorities, who waived the deal through, but by those in France, a big salmon customer. The divestment created Lighthouse Caledonia, since renamed The Scottish Salmon Company. The Sunday Herald understands managers involved in the Marine Harvest/Morpol deal are anticipating history could repeat itself.

Tom Seaman, co-founder of industry site Undercurrent News, said: "I'm pretty confident that they won't be able to keep everything in the UK.

"They will probably have to pick the worst-performing 20,000 tonnes [out of about 62,000] and get rid of them. Having said that, most of their operations are quite good so it could lead to a decent opportunity for one of the other companies."

Oddgeir Oddsen, head of Norwegian salmon egg producer SalmoBreed, was in charge of Pan Fish Scotland at the time of the 2006 merger. He thought the deal might be accepted since the combined market share will not be quite as high this time.

But he said: "It's not good for people like us who supply salmon farms because there are fewer and fewer players in the industry in Scotland. It's not good for customers either. When I came to Scotland in 2004, there were a lot more farming companies.

"It's different from Norway, where there are a lot more smaller companies. The Norwegian industry has enjoyed much more support from the banks and the government."

Ivan Vindheim, finance director of Marine Harvest, said: "We have to file an application to the European competition authority. Then it's up to them if we can have it or not. We won't speculate on that, but our starting point is that we want to own Morpol as a whole. We don't want to divest anything."

He added that in global terms, the deal only increased Marine Harvest's share of production from 22% to around 23.5%.

Marine Harvest has so far bought 49.5% of Polish-based Morpol, although it is hoping to buy the rest of the company in the coming weeks. Morpol's Scottish salmon farms are concentrated in Orkney and Shetland but its main business is salmon smoking, most of which happens in Poland.

The deal will mean that four of the big five salmon producers in Scotland are controlled by Norwegian interests, leaving the Edinburgh-based Scottish Salmon Company as the only exception.

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