* Marine Harvest sets sights on Chile and Norway
* Chile market fragmented and undercapitalised
* Global demand for salmon soaring
OSLO, Jan 24 (Reuters) - The world's biggest fish farmer Marine Harvest, awash with cash thanks to soaring salmon prices, is poised to take an active role in consolidation of the $140 billion industry, its CEO said on Friday.
The Norwegian company, part of billionaire tycoon John Fredriksen's business empire, has already picked up a quarter of rival Grieg Seafood and has set its sights on further consolidation in Norway and Chile, Chief Executive Alf-Helge Aarskog told Reuters.
"Most of the Chilean industry didn't make any money in 2013 in the best of markets. That shows costs are up and there are big biological challenges," he said. "We have stated that we would like to take part in consolidation in Chile and Norway."
Aarskog believes that the challenges in Chile make it ripe for consolidation that could revolutionise fish farming, also known as aquaculture, to help to meet rising demand for high-quality protein products, particularly in developing markets.
He declined to detail specific plans because of regulatory constraints, but analysts said that several domestic rivals could be on the radar as well as smaller firms in Chile.
"We expect further sector consolidation, especially with sizeable farming assets available in Chile, while Cermaq and Grieg Seafood are takeover targets," Handelsbanken analysts said, adding that Marine Harvest would be the most likely suitor for larger assets.
Expansion could also come from new licences as Chile opens new areas to farming, giving cash-rich Norwegian players an opportunity to tighten their grip on the global market.
Marine Harvest is also due to list on the New York Stock Exchange next week, hoping for increased exposure and a higher share price, benefiting from comparison with higher-valued meat producers on the exchange.
"We know that fish farming shares trading in Oslo underperform protein firms such as BRF, Tyson and Marfrig by 15 to 30 percent on average," Aarskog said. "So we're hoping to get a repricing of the stock and to be compared with other protein players."
Fish still accounts for only 6 percent of global protein production, leaving the market with significant growth potential, particularly as fish farming consumes less energy than traditional meat production.
Marine Harvest failed with a $1.7 billion bid for Cermaq last year after the Norwegian government moved to block the deal. However, analysts say that its firepower has increased since then, noting that the company also has the backing of Fredriksen, whose wealth is estimated at $11.5 billion.
Salmon prices rose to record highs at the end of 2013 and supply growth will be limited to 3-5 percent over the next several years as producers struggle to boost capacity, keeping prices under pressure and earnings elevated, analysts said.
Marine Harvest, worth $5.2 billion, is expected to boost earnings before interest, tax, depreciation and amortisation (EBITDA) by 42 percent this year to 5.7 billion crowns ($932 million), a Reuters poll of analysts showed.
It is expected by analysts to pay out more than half of last year's earnings in dividends but that would still leave free cashflow of about 1.5 billion crowns, with the figure rising this year and next.
Despite capacity problems, the global fish farming industry has grown by about 9 percent a year since 1980 and analysts estimate that production of farmed fish will be on par with wild-catch volumes by 2020.
Norway is by far the biggest farmer, with Chile a distant second, plagued by a scattered ownership structure, lack of financially strong firms and diseases, particularly sea lice.
"We expect a significant consolidation in Chile in order to cope with financial and biological issues," Pareto Securities said. "In Norway we expect the farming companies to continue acquiring small and mid-sized players."
Aarskog, meanwhile, is clearly excited by the prospects for his company and the sector as a whole.
"Our vision is for Marine Harvest to lead a kind of 'blue revolution'; similar to 5,000 years ago with the agricultural revolution," he said.
"Aquaculture really changes the market because it can supply fish 365 days a year and supply a product that is convenient for the consumer." ($1 = 6.1165 Norwegian krones)
(Editing by David Goodman)