Newfoundland’s largest seafood processor is inching closer to having new owners. If the deals go through, the U.S. division in Danvers, Mass., may be sold to a longtime competitor, and its Canadian holdings will go to another Newfoundland seafood company.

One monkey wrench in the works has been a stalemate between the federal and provincial governments over fish quota — the province wants control of the quotas to guarantee they will be available to the new FPI buyers, but the federal fisheries minister has been saying no guarantees. By mid May the two appeared to be reaching a workable compromise, but the provincial fisheries minister said, “We won’t make a deal just to make a deal”

At the same time, a major shareholder and former FPI director is being investigated for insider trading for his sale of FPI stock.

Fishery Products International’s profitable value-added frozen seafood, foodservice, retail and marketing division in Danvers may be sold to High Liner Food Inc. based in Lunenberg, Nova Scotia.

High Liner, which still operates a large plant in Portsmouth, N.H., used to do business under the name of National Sea Products and for many years operated a frozen seafood processing plant on the Rockland waterfront.

The Newfoundland-based FPI assets — five plants, vessels and an offloading facility, including the offshore shrimp, turbot and scallop business –may be sold to Ocean Choice International, Inc., based in St. John’s. OCI, formed in 2000 as an umbrella for a number of seafood companies, is part of the Penney Group, which has a strong presence in Prince Edward Island as well.

OCI manages several processing plants, two factory freezer vessels and also works in partnership with several Canadian and international companies. The company is a major processor of snow crab, lobster, Northern shrimp, pelagics, cod, redfish, turbot and mussels.

By mid-May, Ocean Choice had met amicably with FPI’s union. The 1,700 members of the Fish, Food and Allied Workers voted 61 percent overall in favor of an Ocean Choice contract proposal, although two-thirds of workers in a Port Union shrimp plant rejected it and Burin plant workers held a one-hour wildcat strike to protest a 46-cent pay cut.

The province of Newfoundland and Labrador has control over the fate
of FPI since the company was created as a Crown Corporation in 1984 that combined a group of failed small processing companies. Although FPI was partly privatized in 1993, the governing law, the FPI Act, still gives the province control over any sale of FPI’s assets and the ability to restrict many operating decisions.

Although FPI has reached non-binding agreements with OCI and High Liner, any sale depends on the federal and provincial governments reaching agreement on control of fish quotas currently used by FPI.

“They’re exploring ideas with us in terms of transferring licenses and quotas in some other forms that would offer long-term comfort to the successor to FPI — if there is one — and to communities where FPI operates,” provincial fisheries minister Tom Rideout said.

Federal fisheries minister Loyola Hearn has said all along he will not agree to a transfer, but offered to make it a condition of OCI’s license that the company land its groundfish quotas in the province.

But Newfoundland officials have called the condition meaningless and Rideout said recently the federal government is offering a more acceptable measure. Under a compromise, a separate company controlled by OCI and the provincial government would be set up to control the groundfish quotas.

OCI would be forced to land and process the quotas in Newfoundland or suffer sanctions. Although this compromise may prove acceptable, Rideout said a final agreement has not yet been reached.

“A deal is not done and may never be done,” Rideout said, adding the provincial government will be looking out for the best interests of the province and the towns that depend on FPI for their economy.

FPI reported a good first quarter this year, announcing a net income of approximately $2.9 million (Canadian), a turnaround of $5.6 million over the same quarter last year, when the company had a net loss of approximately $2.7 million. In March the company also announced a profit of $1.9 million in 2006 despite a fourth-quarter loss of $1.7 million. As FPI’s sale appears closer, the provincial government has launched an insider-trading charge against former FPI director George Armoyan concerning the sale of his stock in the company.

A spokeswoman with the government’s Fisheries Department says the province asked security regulators to investigate Armoyan’s massive selloff after officials noted a stock price jump in late March and early April, just as the company was negotiating the sale of its assets. It is illegal to trade in stocks based on information that has not been made public.

Armoyan’s investment company, Clarke Inc., announced gains last month of $12 million, nearly half of which came from the sale of its shares in FPI. Clarke Inc. is one of FPI’s largest shareholders. Armoyan has said his resignation was prompted by frustration caused by his dealings with the provincial government.