The film will start shooting in August with director Julius Kemp. Financing was closed here in Cannes.
The film is described as a splatter movie laden with black comedy.
Ingvar Thordarson produces with Mike Downey and Sam Taylor as well as Solar Films of Finland. Other backers include the Icelandic Film Fund and the Nordic Film and TV Fun. No sales agent is set yet.
The companies previously worked together on Eleven Men Out and local box-office hit Astropia.
Sjon Sigurdsson, Oscar nominated for his Dancer In The Dark screenplay, wrote the script. The $3m project will shoot for 40 days in and around Reykjavik on several fishing vessels, as well as at Kemp and Thordarson's new film-production studio The Atlantic Film Studios.
Casting is currently underway in London, New York and Tokyo to cast the international tourists who go on a whalewatching trip and find themselves at the mercy of 'Fishbillies' in Icelandic waters. Gunnar Hansen, who played Leatherface in the original Texas Chainsaw Massacre films, is already on board.
Kemp said: 'It's a cross between the original Texas Chainsaw Massacre and The Blair Witch Project, combined with the dark and bloody humour of Evil Dead.'
'We will shoot with an international cast and in English,' notes Thordarson. 'We are making a classic slasher movie with all the bells and whistles.'
'We have been looking around for a classic slasher/horror film,' adds F&ME principal Mike Downey. 'We are looking to repeat the success of [Deathwatch] with Reykjavik Whale Watching Massacre.'
'We're doing more reverse co-productions now,' Downey told Screen about F&ME's current growingn slate. 'The UK tax credit is actually working well for that.'
F&ME's development slate -- backed by a $1m fund announced in Berlin -- also includes Nigerian story Jesus Christ Airlines written by Jon Atli Jonasson and Keith English's London-set character drama The Enemy written by Peter Milligan, which will be UK-funded through an EIS (with David Marlow at SilverLight).
Another hot project in development is Untitled Stasi Project, about a Scottish professor starts working for the Stasi, to be directed by Eiche Bettinger. Longer-term, there is a Charles Darwin film -- 'a rollicking romp around the world,' Downey says -- that would shoot in 2010. Stephen Daldry is working on the concept for the story now and then a 'classy writer' will be hired to do the script.
Also in development is Cassandra At The Wedding, about two sisters in the 1950s. Peter Milligan is adapting Dorothy Baker's book with Bruno Heller (TV's Rome).
F&ME's finished films in Cannes include animated Quest For a Heart, Project Two (sold via Coach 14 and attracting English remake rights -- the previous title was Mirror Maze) and Juraj Jakubisko's Bathory (sold via Sola Media). F&ME's films in post are White Lightnin' (Salt) -- Momentum has UK rights, The Turtle's Song (Sola Media) and Buick Rivera (Bavaria International.)