Alfesca, which owns Farne Salmon and Trout and Lyons Seafood in Britain, announced that discussions relating to its proposed acquisition of the private label ready meals supplier, Oscar Mayer, have been terminated.

The decision was taken following significant raw material cost inflation in recent months, which has impacted the results of the company and caused the trading environment within the ready meals sector in the UK to deteriorate.

Given the current uncertainties, the proposed transaction would not be conducive to Alfesca creating value for its shareholders at this time.

Alfesca said it will continue with its strategy to further develop and grow its business.

Although not stated, it is more likely to look at other seafood operations which have served the business well so far.

With the benefit of a strong balance sheet and support of its banking consortium and key shareholders, Alfesca said it was evaluating new opportunities taking into account current market conditions and further announcements would be made in due course.

Just a few weeks ago, Alfesca, alone among most Icelandic seafood operations, announced a successful first half trading year buoyed up by strong Christmas sales of items like salmon and shellfish.

Turnover or sales for the half year shot up by 14.2 per cent to 396.1 million euros (around £304-million).

But at the time, chief executive Xavier Govare hinted at the problem of high raw material costs, warning that the trading environment and market conditions for the rest of the 2008 calendar year would be very difficult.

"Whilst we progress with our plans to further strengthen Alfesca and increase shareholder value, our results demonstrate that Alfesca is well positioned and able to manage the adverse conditions," he said.

However, he was confident that the company would continue to deliver strong results this year.

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