NLIS 5
June 6, 2005
(Justice)
(Fisheries and Aquaculture)
 

New FPI proposal to be subject of free vote in House of Assembly

A sitting of the House of Assembly will be held on June 9 and 10 to debate a bill concerning the proposal of Fisheries Products International (FPI) Limited to restructure its U.S.-based marketing division. The debate will conclude with a free vote on FPI�s proposal.

"FPI is a publicly-traded company, but it is bound to the requirements of the FPI Act," says Tom Marshall, Minister of Justice and Attorney General. "Under that legislation, a careful balance must be struck between the ability to sustain a viable and competitive business, and the long-term interests of Newfoundland and Labrador."

"We have consistently been standing up for the interests of our rural areas," adds Minister Marshall. "It�s been over a year since FPI first proposed to sell its marketing and value-added group, initially retaining a 60 per cent interest in the new entity. This proposal did not contain any binding commitments or safeguards regarding workers or communities. We made it very clear that there is legal uncertainty about whether this transaction is permitted under the FPI Act. As a safeguard, we also asked FPI to make commitments regarding community interests.We then began a series of discussions with FPI aimed at protecting the public�s interests. We listened to the concerns of people from affected communities such as Harbour Breton and Fortune, and we asked FPI to address these issues.

"The result of our efforts is that FPI has made a series of commitments to local operations, particularly in rural areas. This includes expanded secondary production on the Burin Peninsula and income support to Harbour Breton. Commitments have been made regarding shared marketing services, information technology, and research and development. As well, the company would be contractually bound to land its fish quotas in Newfoundland and Labrador. We believe that the public�s role in the formation of FPI means that this important issue should be put to a debate and to a vote in the House of Assembly, one that is free of partisan politics."

Trevor Taylor, Minister of Fisheries and Aquaculture, believes that while FPI must have the flexibility to remain a key participant in the seafood industry, there must also be sufficient safeguards to protect the company�s operations in Newfoundland and Labrador.

"We have been taking strong actions to strengthen rural economies and are committed to protecting the best interests of our province�s seafood industry," says Minister Taylor. "We recognize the public expectation that, while government supports the need for FPI to grow and prosper, there is a clear obligation to protect fish plants and communities. Therefore, we have spent months encouraging a better proposal from FPI, one that elected representatives can vote for or against on behalf of their constituents. As an overriding safeguard, should FPI breach any of their commitments, FPI�s Newfoundland and Labrador groundfish enterprise allocations will revert to the provincial government."

"FPI�s future access to these quotas will be subject to specific restrictions as set out in the agreement," says Minister Marshall. "Let me be clear that this is not a government proposal. It represents a proposal from FPI that is being placed before the House of Assembly for its consideration. MHAs from all parties will be briefed so they can go back to their communities to discuss the matter. Government Members are free to vote based on their own assessment of FPI�s proposal. This is the right thing to do."


In addition to the backgrounder below, additional information is available below:

Media contact:
Heather MacLean, Justice, (709) 729-6985, 690-2498
Alex Marland, Fisheries and Aquaculture, (709) 729-3733, 690-6047

BACKGROUNDER � FPI INCOME TRUST TRANSACTION

Fisheries Products International (FPI) Limited was established under the FPI Act to ensure long-term stability in the province�s fishing sector by combining a number of companies into a single large, modern, competitive, and profitable company.

In the early 1980�s, Newfoundland and Labrador�s fishing industry was experiencing financial difficulty. The federal and provincial governments provided funding to create a new fish processing company from the assets of some of the companies under financial distress. FPI was privatized and is now owned by thousands of investors throughout the world. However, its business activities are partially governed by Newfoundland and Labrador�s Act Respecting the Return of the Business of Fishery Products International Limited to Private Investors ("FPI Act"). The Act is available online at www.gov.nf.ca/hoa/statutes/f15.htm

In 2004, FPI publicly announced a proposed transaction that would restructure its North American seafood and marketing business (its Marketing and Value-Added group, or MVA). FPI would initially retain a 60 percent interest in the new U.S. marketing company. By establishing an Income Trust, the company expects to receive cash proceeds of up to $100 million from the initial sale. (In the future, FPI�s stake in the MVA could be diluted through the issuance of additional trust units or by the further sale of FPI�s share of the company.) It had originally stated that the transaction would provide proceeds to pay down $30 million of existing debt, with the remainder of the monies used for working capital and investment purposes.

The provincial government has since sought specific commitments from the company that would benefit local operations in Newfoundland and Labrador. FPI is now committing that proceeds from the initial offering would be used to support and improve the company�s primary harvesting, processing and marketing operations and business. FPI has also agreed to controls on the distribution of capital to shareholders which will ensure that the initial offer and future sales of interests in MVA are used to benefit FPI�s business operations.

The company is making specific commitments not to close any of their existing fish plants for the next five years as long as the resource base is maintained and the operations are economically viable (the term " economically viable" is defined and can be arbitrated), with the only exception being that the Bonavista plant will either be replaced or combined with the Port Union plant. Local investments would be made to expand secondary production on the Burin Peninsula, to improve information technology (IT) capabilities, to provide income support in Harbour Breton, to provide marketing services to other operators, and for additional research and development (R&D). An important long-term consideration is the contractual commitment that FPI�s valuable Enterprise Allocations (EAs) is landed in the province.

There is legal uncertainty as to whether FPI�s proposed transaction is in breach of section 7 of the Act, which states that the company cannot sell "all or substantially all of its property or business which relates to the harvesting, processing and marketing of seafood." Consequently, the matter has been referred to the House of Assembly to express its will regarding the FPI transaction.

2005 06 06                       1:45 p.m.


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