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Overview of M&A activity

In 2020, the covid-19 pandemic has affected the Icelandic economy in many areas. The tourism sector, which had greatly helped the Icelandic economy after the financial crisis of 2008, almost completely collapsed after the outbreak of the virus. The turnover of Icelandair decreased by 81 per cent in the third quarter of 2020 compared to the previous year and the air traffic in the control area around Iceland was in September 2020 less than a third than it was a year ago. This will most likely mean that the planned resurrection of a new WOW air will not happen, at least in the near future, and the launch of the announced new airline Play also appears to be halted. One transaction in this sector was concluded just prior to the crisis as Avia Solutions Group from Lithuania acquired Blue Bird Cargo, a cargo airline based in Iceland. As a direct consequence of the coronavirus situation, both Icelandair and the cargo and wet lease company Air Atlanta Icelandic have decided to scrap some models of their aircraft fleets. PAR Capital Management has divested large portions of its shares in Icelandair and it did not subscribe to the new shares issued in order to secure future operations. In early April 2020, the 75 per cent divestment of Icelandair Hotels to Berjaya Land Berhad from Malaysia was finally concluded.

However, despite such discouraging news, there is still some M&A activity. The country's largest listed company, Marel, which produces fish- and meat-processing machinery, has purchased the German producer of cutting technology TREIF Maschinenbau GmbH for €128 million in cash and 2.9 million shares in Marel in September 2020, resulting in a purchase price of over €140 million. Earlier this year, Marel refinanced €700 million of its debts with a syndicated loan.

In the energy sector, HS Orka, the largest privately held electricity company with a market share of 8 per cent, remains a sought-after target. HS Orka operates geothermal power plants in the area of the famous tourist destination Blue Lagoon. Financial investor Ancala Partners and Jarðvarmi, a cooperative venture of 14 Icelandic pension funds, acquired all shares in HS Orka, each holding 50 per cent.

This year, there are also a number of inbound transactions as, for example, French Gaztransport & Technigaz purchased all shares in Marorka, a company specialising in the optimisation of energy consumption on ships for an undisclosed amount.

As in previous years, the four publicly listed real estate companies, Reginn, Reitir, Eik and Heimavellir, have strengthened their property portfolios. In August 2019, property development company Kaldalón was successfully launched to the First North segment of the stock market and the company's capital was raised to 3.7 billion kronur in this context.

In the area of public M&A, Guðmundur Kristjánsson concluded the purchase of the majority of shares in seafood company Brim by acquiring another stake in Brim for 6.5 billion kronur.

There is some ongoing debate regarding the renewal and improvement of the country's infrastructure. Because hydropower and geothermal energy make up the largest portion of the energy market, it has taken some time to set up Iceland's first wind farms; however, there are now a number of projects around the island. Also, several harbours are being extended, and there are promising signs regarding the Finnafjord Port Project in North East Iceland, a joint effort between German port operator Bremenports and several public bodies in Iceland.

Such infrastructure investment could create opportunities for international and domestic investors alike. Several Icelandic pension funds have thus set up an infrastructure investment fund that aims at financing infrastructure projects in public–private partnerships. In September 2019, they acquired a 13 per cent stake in HS Veitur, which is active in the field of district heating and electricity and water distribution.


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