M&A veteran helps nascent Icelandic salmon farmers look for growth capital
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Two would-be Icelandic Atlantic salmon farmers are looking for capital to grow, having tapped Rejkavik-based boutique MAR Advisors to run a process. 

MAR is looking to secure long-term financing for the planned growth of two farmers based in the country’s Westfjords, Habrun and IS-47, the firm’s Magnus Bjarnason told Undercurrent News

Both are currently producing trout, but plan to move into Atlantic salmon farming as they increase production, said Bjarnason. 

Habrun, founded by Haukur Oddsson, has secured an approximately 900-metric-ton license in Isafjardardjup, a large fjord, with an 11,000t license pending. IS-47, founded by Gisli Jon Kristjansson, has secured approximately 1,200t in Onundarfjodur, another fjord, with an additional 1,300t license pending. Onundarfjodur has the potential to farm 2,500t, said Bjarnason. 

There is “substantial interest from Icelandic and foreign investors in these opportunities”, Bjarnason told Undercurrent. He declined to comment on how much the companies are looking to raise. 

“We are evaluating different options and plan to make a decision in the coming weeks with our clients on the next steps to secure their planned growth,” he said. 

“Both companies are producing rainbow trout today. Habrun has 600t in the water and IS-47 110t,” he said. 

Several Norwegian investors, including SalMar and Norway Royal Salmon (NRS), have invested in the Icelandic salmon farming industry. “Icelandic investors, both institutional and private, will be more active” in the fast-growing sector in the future, said Bjarnason. 

During the “What COVID-19 Means for Seafood M&A” webinar, hosted by Undercurrent in early June, Bjarnason and Henning Lund — a senior partner at the Norwegian advisory firm Pareto Securities — agreed that the number of companies operating in Iceland is likely to come down in the next few years. 

“The structure in Iceland is not optimal — though it’s not far from optimal, because they started with clean sheets not that many years ago and took experience from other regions,” said Lund.

“Now we have two regions, two companies in each region, and the size is sub-optimal. So there’s massive gains for all the players there to cooperate or consolidate. So I do think that we will see some consolidation in Iceland, yes,” he added.

The salmon industry in Iceland has been driven by Norwegian investments and expertise, noted Bjarnason, who estimated 2020’s production was expected to be around 30,000t. 

Current licenses allow for an output of around 75,000t; including the current applications which have been filed, production may surpass 120,000t.

“There are way too many companies today, and so there’s an obvious need for consolidation,” said Bjarnason. “I think when it comes to investors, I wouldn’t be surprised to see more Icelandic capital participating in the industry, both institutional money from pension funds, and also from private companies.”

“How fast it happens I don’t know, but, if you count the land-based companies, we’re probably talking about 10 or 12 companies. I wouldn’t be surprised to see that go down to four or five, and this will happen in the next two or three years,” he proposed.

The latest move within Iceland’s salmon sector saw Fiskeldi Austfjarda (which trades as Ice Fish Farm) carry out a private placement, raising NOK 301.5 million ($30.4m) and listing a Norwegian holding company on the Oslo Stock Exchange’s Merkur Market.

Among the Norwegian shareholders which are now involved in the holding company is NTS, which owns shares through its wholly-owned subsidiary Midt-Norsk Havbruk.

Then, earlier this year, Norwegian wellboat and transport giant NTS became the largest single shareholder in NRS following its completed merger with Froy Group. NRS also owns Icelandic stock, with 50% of Arctic Fish which holds licenses worth 11,000t.

While it might make sense to consolidate these salmon farming assets, one hiccup for NTS is that Arctic Fish operates in the Westfjords, while Ice Fish Farm lies on the east of the country. 

The other farmer on the west coast is the largest, Arnarlax, while the second firm on the east coast is Laxar Fiskeldi. Interestingly, Norway’s Masoval Fiskeoppdrett holds over 50% in Laxar, while it, in turn, is owned by Masoval Eiendom; NRS’s second-largest shareholder.

Simply put, NTS/NRS now have strong links to three of Iceland’s four main farmers. The fourth, Arnarlax, is majority-owned by SalMar. They have all been forced to cooperate since their inception, more or less, as the country sought to follow the Faroese model of few companies, managing their fjords closely together.

Also worth noting is that Arctic Fish has one asset the other firms do not: land-based smolt facilities.

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