Fishery Products International of Newfoundland announced in mid-February that it was abandoning its plan to purchase Clearwater Fine Foods of Nova Scotia.
This announcement came on the heels of FPI’s decision to hold off on an earlier announced layoff of 600 Newfoundland workers. Both the original FPI plan to buy Clearwater and the proposed layoffs had met with opposition from workers and provincial officials alike.
The development also came after a hostile takeover of the FPI board of directors in May 2001 by Clearwater’s then-CEO (and now FPI chair) Derrick Rowe.
Regarding the decision by FPI not to purchase Clearwater, Rowe said, “This is a missed opportunity for FPI. The acquisition of Clearwater would have strengthened FPI through the acquisition of Clearwater’s highly profitable fishing assets on terms which we believe were beneficial to FPI shareholders. Unfortunately, given the current environment, Clearwater has opted not to proceed.”
John Risley, CEO and President of CFFI, had notified FPI that Clearwater was no longer interested in proceeding with the transaction. The deal would have been worth a reported $510 million.
Earle McCurdy, President of the Fish, Food and Allied Workers Union (FFAW), says that FPI’s decision was due to widespread opposition across the province.
“This comes as no surprise,” McCurdy said. “I certainly wasn’t surprised. Public opinion was overwhelmingly against it, and the [provincial] government has certainly made its opposition clear. I think what FPI needs to do now is get back to the business of processing and selling fish and quit all the corporate shenanigans.”
Rowe continued, “The board will continue to pursue strategies to build FPI into a global seafood enterprise based in Newfoundland and Labrador. Our success will depend on being able to access the capital we need to improve our existing operations and to compete effectively in the global marketplace.”
An all-party committee held hearings across the province about the proposed purchase and layoffs, and opposition was expressed both through testimony and demonstrations outside the hearing rooms. The committee was expected to make its report to the full House of Assembly in March, and observers expect that legislation to restrict ownership of FPI shares will follow.
In a related development, FPI issued a statement it had lost $3 million in its last quarter. But the FFAW’s McCurdy attributed the loss to corporate takeover maneuvers, or “corporate shenanigans,” rather than to operating expenses.
Indeed, FPI’s own report to its shareholders included, “Fishery Products International Limited (FPI) today announced its financial results for the fourth quarter and full year ended December 31, 2001. The fourth quarter operating results were the best in a decade with revenues up and gross margins up,” said Rowe. “Without the one-time cost related to the aborted Clearwater acquisition, it is an exceptional quarter in a very difficult market.”
Figures showed that fourth quarter income before “unusual items” was $3.6 million, or 23¢ per share compared to $3.2 million, or 21¢ per share in the prior year fourth quarter. For the year ended December 2001, FPI recorded income before unusual items of $10.5 million (69¢ per share) on sales of $703.1 million. During the quarter, FPI recorded net income of $1.9 million (12¢ per share), a $1.3 million decrease over the prior year fourth quarter net income of $3.2 million (21¢ per share). Net loss for the year was $1.0 million (7¢ per share) compared with an income of $13.6 million (90¢ per share) in 2000.
Rowe added, “I am very pleased with the operating results, particularly for the last six months, which met our target of exceeding comparable earnings for the prior year.”