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Corner Brook businessman Bill Barry has reached a tentative deal to buy the Newfoundland operations of FPI Ltd., which could lead to the breakup of the hard-pressed fishery company.

Mr. Barry -- whose family has been in the fish business for four generations -- is offering to buy FPI's fishing rights and Newfoundland processing plants for an undisclosed price.

FPI was created in 1984 out of several failing fish companies. But the company's Canadian operations have been shrinking in recent years because of fishing moratoriums and competition from cheaper processing plants overseas.

Sources say the Barry Group deal is acceptable to the company's board of directors, which expects to receive rival offers by today.

But any sale requires the blessing of the provincial government, which scuttled a sale to a group involving Mr. Barry back in 1999. That's because the province's FPI Act prevents any shareholder from owning more than 15 per cent of the company.

"[The government]would either have to give its blessing for the sale of assets in Newfoundland or it would have to repeal the Act for that to happen. Then, of course, the 15-per-cent rule would go away," said John Risley, the Nova Scotia businessman who controls Clearwater Seafoods Income Fund and owns slightly less than 15 per cent of FPI's stock.

If the cap were eliminated, the company would be free to sell the rest of the business -- including its U.S. manufacturing and marketing assets -- to a strategic buyer such as High Liner Foods Inc. of Lunenburg, N.S.

But the government said yesterday that it will only do away with the FPI Act or lift the ownership cap if fishing rights currently owned by FPI revert back to the province.

That would give the province a stronger hand in ensuring that fish caught in Newfoundland waters are processed in the province, instead of in Chinese or other foreign plants, provincial fisheries minister Tom Rideout said yesterday. If fish stocks rebound and fishing moratoriums are lifted, the fishing rights, or quotas, could become more valuable.

"Ownership must rest with the province on the quotas and licences," Mr. Rideout said.

One source familiar with talks between prospective bidders and the St. John's-based company said FPI would cease to exist if a divestiture of assets goes ahead as planned.

The company confirmed yesterday that it recently held preliminary talks with a number of interested parties, including Mr. Barry's Barry Group, relating to the sale of certain FPI assets.

Sources say there are at least two other probable bidders for the local assets. One is Ocean Choice, a local fish company partly owned by St. John's entrepreneur Ches Penney.

An FPI management group led by chief operating officer Graham Roome and marketing executive Randy Bishop is believed to be marshalling a bid. But sources say the government has said it is not predisposed to a management offer.

Certain FPI shareholders, including Mr. Risley and his investment partner George Armoyan, have argued that the FPI Act is a straightjacket that restricts the company's ability to operate freely and grow. But the provincial government has insisted it is important to protect Newfoundland's economic core and heritage.

FPI hopes that once the local assets are sold to Newfoundland buyers, it will eliminate any need for the FPI Act to exist to protect local jobs and assets, thus allowing the company's other non-Newfoundland properties to be auctioned off.

The speculation is that High Liner Foods would be interested in the U.S. manufacturing and distribution assets. A British division and offshore scallop and shrimp assets could be sold to the highest bidder.

Mr. Barry, the owner of the Barry Group, a 160-year-old family company, has long been pursuing FPI's Newfoundland fish plants, and recently acquired one of its abandoned plants in Harbour Breton.

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