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The legendary Irving family is moving to break up its $6-billion business empire as it struggles to accommodate the demands of new generations, thus ending a 125-year-old Canadian dynasty.

Sources familiar with the sprawling family conglomerate say the three principal owners, brothers J.K., Arthur and Jack, all in their 70s, are engaged in tense discussions that will see the various Irving businesses split among family members.

Most important, the energy business, managed by Arthur and his sons, would become independent from the forestry business, operated by J.K. and his children.

The reason, as in most family splits, is a succession impasse, the sources say. Decision making was manageable when there was one owner, the patriarch K.C. Irving, and even three owners - in the person of his three sons, who operated for years on a close collegial basis.

But there are now five younger Irvings working in the business, led by two strong-willed cousins: J.K.'s son Jim, day-to-day manager of the forest products business, and Arthur's son Kenneth, who handles the fast-growing energy business in Saint John.

The tension was underlined yesterday when only one of the three elder brothers, J.K., now 79 - flanked by his sons Jim and Robert - attended the Toronto lunch marking the announcement of their induction into the Canadian Business Hall of Fame.

J. K. Irving confirmed in an interview yesterday that the structure of the family business is evolving.

Asked if the different arms would become independent of each other, he said, "that's the evolution taking place today, and we're just in the process."

But he then added, "I wouldn't say it's making things more separate - it's evolving."

People familiar with the discussions say the central focus of the planned reorganization is a holding company founded by K.C. Irving in Bermuda at about the same time he moved to the southern tax haven in 1971. It is understood that an international team of tax, corporate and restructuring lawyers and financial specialists are currently working on a plan to carve up the company, and that it is unlikely that changes will take effect until at least next year.

"The ownership structure that was put in place by K.C. can't survive. What we are talking about is bringing the Irving business we know today to an end," said a person familiar with the matter.

Sources involved in the discussions said the family first began moving toward a breakup a few years ago, when tensions began to mount over succession and strategic planning.

"There is friction, but it is not unworkable friction," said one person close to the family.

It is understood that the restructuring will involve several jurisdictions, tax rulings and other court approvals because of the families' intricate corporate structure which involves Canadian, U.S. and Bermuda law.

"Unscrambling the eggs is very complicated," this person said.

The Irvings' business interests, which consist of forestry, retail, trucking, media and energy properties, represent Canada's third-largest fortune, estimated at about $6-billion.

The business began as a single sawmill in Bouctouche, N.B., built in 1882 by J.D. Irving, grandfather of the three brothers. But under K.C. Irving, their hard-driving father, the family diversified into car dealerships, refineries, service stations, and a vertically integrated conglomerate based on tight financial discipline.

Inrecent years, the major parts of the empire have been going in different directions. The energy business is booming, propelled by a soaring oil price and Kenneth Irving's plans for a major energy hub in Saint John, led by a new liquefied natural gas terminal and a refinery expansion.

Meanwhile, the forestry division is being hammered by a rising Canadian dollar. "The dollar is a disaster in the forest products business," J.K. Irving said. "When the dollar is up where it is, it's devastating. What more can you say?"

He said he has no doubts that the family forestry company, J.D. Irving Ltd., will survive this shock but it has to stay flexible and keep investing in its mills. "There is always a turn in the road - the main thing is to stay on the damn road," he said.

He said J.D. Irving Ltd. is determined not to downsize further but conceded that there have already been cuts. "I think that's been done - we're down to bare bones now."

J.K. Irving said he still likes to know what's happening in the business and often gets out to visit his forests and paper mills. He can get plenty riled when he reads a story he doesn't like in his family owned Saint John Telegraph-Journal - but insists he doesn't meddle in the newspaper that is managed today by his grandson Jamie.

"Some mornings I get up and read the newspaper and I say 'What in blazes!' Mr. Irving said yesterday. "But I do not interfere. I never interfered with anybody that is doing the job in newspapers,' he said, responding to the oft-expressed criticism of the Irvings' dominance of New Brunswick's print media.

News of the Irvings' induction comes in the wake of a legal dustup between the family's media interests and a former employer who is launching a weekly newspaper in Woodstock, N.B., that challenges the family's hegemony. At one point, the former employee's house was raided to obtain confidential data that was allegedly taken from the Irvings' news operation.

Asked if the tactics weren't a little heavy handed, J.K. Irving insisted he did not know the details of the case, pointing out that the media properties are now controlled by his older son, Jim. "We like to get along with everybody down home," he insisted. "Nobody likes to be nasty."

He admitted the family has always exercised hands-on management, a tradition that began with K.C., who attended to the smallest details, including the exact placement of gas tanks in the family's service stations.

The values of K.C. Irving, who died in 1992, still permeate the organization, he said. His father was a stern taskmaster who insisted on perfection. The overriding objective today, as in K.C.'s time, is: "Do it right the first time and if it's not right, fix it fast."

He said he pays little attention to what people say about the family, and rejects the idea that he and his family are powerful people who elicit awe. "No sir, we get up and do the best we can every day."

The three Irving brothers join a group of 2008 Business Hall of Fame inductees that include John Cleghorn, former Royal Bank of Canada chief executive officer; Serge Godin, founder and executive chairman of CGI Group Inc., and the late John (Bud) McCaig, who built Alberta's Trimac Corp.

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