Business

The Claws Come Out

Two Atlantic seafood tycoons square off over control of Newfoundland’s biggest company

John DeMont April 30 2001
Business

The Claws Come Out

Two Atlantic seafood tycoons square off over control of Newfoundland’s biggest company

John DeMont April 30 2001

The Claws Come Out

Business

Two Atlantic seafood tycoons square off over control of Newfoundland’s biggest company

John DeMont

John Crosbie has been back on the Newfoundland campaign trail lately. Instead of fading quietly into a lawyerly twilight at 70, the onetime Tory finance minister has been on the stump in small towns and beating the drum in media interviews—all because he says Vic Young has been too long in the saddle as chairman of Newfoundland’s biggest company, Fishery Products International Ltd. Crosbie is backing a new slate of directors, led by a usurper from the mainland, to run the venerable St. Johnsbased seafood firm. It’s an unpopular notion in a province ever worried that out-

siders are going to pillage its natural resources. Which is precisely why Crosbie, who has weathered eight federal and provincial elections and travelled Newfoundland selling everything from the Free Trade Agreement to the Atlantic groundfish moratorium, is the perfect pitchman. “I opposed the authoritarianism of Joey Smallwood when I was getting started in politics,” he says. “I am just as opposed to the authoritarianism of Vic Young.”

Yes, passions—and rhetoric—are running a tad high in the dustup over FPL In close-knit Newfoundland, even something as mundane as a boardroom squabble takes

on an intensely personal nature. Stirring the pot has been the uncrowned seafood king of Nova Scotia, John Risley, president and owner of Clearwater Fine Foods Inc., one of the world’s largest exporters of shellfish. FTe wants to depose FPI’s 13member board because, he says, their conservative management style has hurt the company’s stock price. Not so, maintains Young, Newfoundland’s fishing industry supremo by virtue of his 16 years as FPI chairman. FTe says Risley simply wants to install his own slate of directors so he can ultimately take control of, and gut, one of his biggest competitors. Last week, a Newfoundland Supreme Court judge ruled that FPI’s shareholders will be able to choose the directors they want at the company’s May 1 shareholder meeting. “Shareholders hope that if you get both

sides in a room together they should be able to work something out before then,” says Irwin Michael, a portfolio manager with ABC Funds in Toronto, which owns 825,000 FPI shares. Increasingly, though, that seems like wishful thinking.

The big fish in this pond, after all, are used to having things their own way. Risley, an insurance actuary’s son, started out peddling lobster from a pickup truck 25 years ago. Since then, he has built Clearwater into Canada’s largest privately owned seafood business. Crosbie calls him “the greatest entrepreneur and risktaker in the Atlantic fishing industry.” A short, intense man who used to race yachts and cars, Risley, 53, refuses to say how profitable Clearwater is. But he has made enough money to be one of Nova Scotia’s most generous philanthropists— and to own an island in Mahone Bay, near the 30,000-square-foot home he recently built for an estimated $20 million.

Plis 55-year-old nemesis is no slouch either. Patrician-looking and silver-haired, Young did an MBA at the University of Western Ontario before returning to Newfoundland to take a job with the province’s treasury board where, at 27, he became deputy minister. Six years later, he was appointed chairman of Newfoundland and Labrador Hydro, which he managed to mrn around despite the poor revenue deal that, as premier,

Smallwood signed with the Quebec government for the Churchill Falls hydroelectric project.

At FPI, he’s turned the same trick under even worse circumstances. When the 1991 groundfish moratorium devastated the Atlantic fishery, Young closed plants and diversified into new fish species. The result: FPI stayed afloat when other Firms failed, and last year increased profits by 76 per cent to $13.6 million.

Yet as a company, FPI has always been a different kettle of cod. It was cobbled together in late 1983 from the bankrupt ruins of seven of the province’s major fishing companies, thanks to a $ 150-million rescue package that made the federal and provincial governments and the Bank of Nova Scotia its owners. In 1987, a $200-

million equity issue cut the company free of government ownership. Even then, FPI was not exactly a textbook public company: to help the firm stay independent while it got its sea legs, the provincial government decreed that no entity could own more than 15 per cent of the common shares—and that no individuals or corporations could act “in concert” by voting more than 15 per cent of the stock.

Young has always said the board intended to ask the Newfoundland legislature to remove the restriction, which, by most interpretations, tramples shareholder rights. All the same, the 15-per-cent clause came in handy in December, 1999, when Clearwater, along with Newfoundland Freezing Plants Corp., controlled by Newfoundland businessman Bill Barry, and Icelandic Freezing Plants Corp. of Reykjavik, Iceland, offered $9 per share for all FPI stock. Risley’s consortium only dropped the hostile, $ 142-million bid when it seemed certain Newfoundland had no intention of removing the 15-per-cent restriction.

But Risley and his partners weren’t through yet. Since the failed bid, Clearwater, Icelandic and Bill Barry’s firm have bought enough stock to control nearly 40 per cent of FPL On March 26, Risley

Vic Young claims his opponents intend to close plants and slash jobs

upped the ante, putting forward an alternative slate of FPI directors, which included Crosbie, Nova Scotia grocery magnate Frank Sobey and Newfoundland telecom tycoon Derrick Rowe, who would replace Young as chairman if the slate succeeds. Both Risley and Young have since visited Toronto to lobby for support among Bay Street institutional investors.

Risley maintains he has only the purest of motivations: he wants his shares to trade closer to the $15 to $20 value he believes E they merit, rather than the $ 11.40 I FPI’s stock was fetching last week. I In his view, the current board— I which includes Thomas Kierans, I former president of the C. D. “ Howe Institute and chairman of the Canadian Institute for Advanced Research, and Elizabeth Parr-Johnston, president of the University of New Brunswick —lacks the right stuff for the job. “This is about performance,” says Risley. “Young and his board are risk-averse, enormously conservative and mentally immune to the opportunistic psyche that invades most company boardrooms.”

Young, politically astute enough to once be considered a potential provincial Tory leader, has been casting a very different line, especially to Newfoundlanders. “This whole thing has nothing to do with our performance, corporate democracy or any of that,” he says. “This is about a competitor who wants control for his own purposes.” Even though Risley contends that he and his board would invest millions and keep FPI plants open year-round instead of for a few months, Young has depicted them as opportunists who intend to close plants and slash jobs to boost the share price. All the inflammatory talk has predictably touched a nerve. Unions representing fisheries and plant workers have rallied around the besieged board. So have the mayors of communities in which FPI plants are the only real employer. “We like the approach the current board has to running things,” says Churence Rogers, mayor of Harbour Breton, a town of 2,290 on the island’s south coast. Now, Young and his allies must try to convince shareholders of the same thing. ED