The Arctic region remains one of the world’s last largely untouched frontiers with significant scope for new investments to explore, according to speakers at the Arctic Opportunities event, held by BBA Fjeldco and Arion Banki in London earlier this month.

The region including Iceland, the Faroe Islands and Greenland, has long been seen as an area with no investment opportunities, but that has now changed, the audience was told. The Arctic is “enormously rich” in resources such as oil and gas, as well as rare metals. “Apart from Canada, perhaps no other part of the world is as rich in rare metals that are used in new technologies,” one of the speakers said.

Meanwhile, there are huge opportunities in the region to invest in nascent wind and hydropower projects, a banker added. Greenland, for example, is traditionally very dependent on oil, and there is an opportunity to invest in its energy transition, he said.

“There is a perception that the region’s investment opportunities are just about oil and gas but there is so much more, including sustainable fisheries, agriculture and eco-tourism, where people want to travel to milder climates on a smaller carbon footprint”, the banker continued. The Arctic Ocean is the most unpolluted seafood resource in the world, another speaker said.

Recent deals within the seafood industry in Iceland include Síldarvinnslan’s acquisition of a 50% stake of Ice Fresh Seafood in September, while online tourism agency Travelshift raised USD 10m in fresh growth funding in August.

Climate change is also driving new opportunities in the region to those that are willing to exploit them. These include opening new North to West shipping lanes that now become available in the summertime as the ice cap melts. This allows for more transport and tourism routes to be added during the summer months, although there are concerns about the environmental impact of this on the area.

Iceland positions as Arctic financial hub

As the only nation-state of the region, Iceland has all the required building blocks to become the central financial hub of the Arctic region, according to the speakers.

The country is working out a roadmap to cement its position as the main financial hub of the region but needs international investors’ help in solidifying its role. One of the challenges is to find investors willing to commit the risk capital needed to help finance Arctic projects, the banker said.

Key area of competitiveness giving Iceland a strategic role in the region include its strong and friendly business environment, partly due to its history as part of the European Economic Are (EEA) since 1994, its well-established financial system, strong infrastructure, its human capital with a highly educated population, and its reputation as a clean, equal and peaceful country, they said.

Iceland’s position between Europe and the US is also a major advantage for island country, with its Reykjavik airport serving as an important transport link between the two continents.

Data-centre provider atNorth is one sponsor-backed company from Iceland. It has a score of 22 out of 100, according to Mergermarket‘s Likely to Exit (LTE) predictive algorithm.* The company has been looking for acquisitions elsewhere in the Nordics, it told Mergermarket in March.

In terms of M&A, in the year to date Iceland has seen EUR 5.3bn spent across 15 deals, compared to just EUR 570.33m across 12 deals in 2022, according to Mergermarket data.

However, it is worth noting that EUR 3.2bn of the volume is contributed by one deal, namely JBT Corporation’s [NYSE:JBT] proposed takeover of food company Marel. Marel has rejected the Chicago, US-based technology solutions provider’s offer, while Eyrir Invest hf., which holds a 24.7% stake in Marel, has given an irrevocable undertaking and entered into exclusivity.

The remaining bulk of this year’s Icelandic deal volume is driven by Danish medical device manufacturer Coloplast’s [CPH:COLO-B] EUR 1.18bn acquisition of Icelandic wound care company Kerecis, while other deals include Digital 9 Infrastructure [LON:DGI9] sale of its stake in Icelandic data-centre operator Verne Global to funds managed by Ardian France.

Further, Iceland’s Stock Exchange has proven its attractiveness to non-Icelandic companies, particularly from the Arctic region and the Nordics, one of the speakers said.

As an example, Norway-headquartered Icelandic Salmon, the holding company for Iceland-based salmon farming company Arnarlax, listed on Reykjavik’s First North small cap exchange in September.

There is a lot more scope for more Arctic companies to list in Iceland, which has a strong institutional investor base with solid experience and knowledge of “Arctic industries”, the speaker said.

*Mergermarket’s LTE predictive analytics assign a score to sponsor-backed companies to help track and predict when an exit could occur through M&A, an IPO, a direct listing or a deSPAC transaction.