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An Invitation to a Merger: An Icelandic case in Strategy


The companies that are the main players in this case are the two largest marketing
companies in the Icelandic fish industry, the Union of Icelandic Fish Producers Ltd.
(UIFP) and the Icelandic Freezing Plant Corporation (IFPC). They were both
traditionally co-operative companies owned by producers in the Icelandic fish industry
until they were changed to Limited Liability Companies in 1993 and 1997.
The markets for Icelandic fish products have changed considerably during the past
two decades. Europe has become the most important market and the Japanese market has
increased its share considerably. The long term traditional markets like the US and
former Soviet Union have declined for the past decade. It is not merely the changes in
market areas that affect the fish industry but also changes within the markets.
The Union of Icelandic Fish Producers Ltd. (UIFP) was, until 1999, almost entirely
in the business of selling salted and chilled fish, while the Icelandic Freezing Plant
Corporation (IFPC) has marketed frozen fish. The years 1997–2001 brought significant
changes to the export sector in the Icelandic fish industry. The Icelandic Herring board
was changed into Islandssild hf. in July 1998 and merged with the Union of Icelandic
Fish producers (UIFP) on 1st January 1999, making it the third largest marketing
company for fish in Iceland. Icelandic Seafood, then Iceland’s second biggest marketing company merged in 1999 with UIFP, making the new UIFP the largest marketing
company for fish in Iceland. IFPC, formerly the largest marketing company in Iceland,
showed unsatisfactory performance in 1998 and 1999, forcing them to change their
operation, mainly by focusing more on their core activity, the sale of frozen fish. Hence,
IFPC has gone out of related businesses, such as transportation, and sold its share in other
companies. After 1999 only two of the four Primary Marketing Companies are still in
operation. To further meet changes in the global industrial environment, UIFP has
expanded and diversified its operation from being only a marketing company for salted
fish into becoming an international marketing company focusing on chilled and frozen
fish. At the same time IFPC has focused its operation on being an international
marketing company for frozen fish.
Through time there have been pressures toward the merger of IFCP and UIFP but
without success. At the annual meeting of IFPC for 2001 the chairman of the board
suggested that these two companies should merge. He claimed that with the merger of
the two companies they would save up to ISK. 500,000,000 and increase their
competitive status globally as well. This case ends at that time, leaving the readers with
unanswered questions regarding the future of the companies.
JEL classification: L1, L2
Keywords: Strategic Management, Case studies, Union of Icelandic Fish Producers,
Icelandic Freezing Plant Corporation


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