Lifeway Foods has rejected the takeover bid lodged by Danone in September as the US-based kefir maker deemed the offer to be undervalued.
France-headquartered dairy giant Danone had sought to increase its 23.4% minority interest in the Nasdaq-listed business into full ownership, offering to buy the remaining shares at $25 a piece.
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Shares in Illinois-based Lifeway Foods dropped almost 3% at one point today (5 November) to $24.09 as the proposal was thrown out by the company’s board, as was revealed in a filing with the US Securities and Exchange Commission (SEC).
They recovered to trade relatively flat at $24.80 as of 4:08pm GMT.
When the bid was disclosed on 23 September, via Danone North America, Lifeway Foods’ shares closed the day at $21.50.
Lifeway Foods has also sought today to block Danone from taking full control of the company through open-market share purchases without paying a premium to shareholders. A so-called rights issue has consequently been launched.
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By GlobalData“After careful and thorough consideration, conducted in consultation with its independent financial and legal advisors, the board determined that Danone’s opportunistic proposal substantially undervalues Lifeway and is not in the best interests of the company and its shareholders or other stakeholders,” Lifeway Foods concluded in the SEC filing.
“In addition, in response to Danone’s proposal and its substantial ownership position in the company, the board adopted a limited duration shareholder rights plan, effective immediately.”
Danone had not responded to Just Food’s request for a reactionary comment to the rejection and how it now plans to proceed at the time of writing.
The rights issue was detailed in a separate Lifeway Foods’ filing with the SEC yesterday and is set to be activated at the close of trading on 18 November.
A dividend of “one right” for each outstanding share will be offered, where the shareholder has the option to purchase “one one-thousandth of a share of series A junior participating preferred stock” at an exercise price of $130 per right.
Lifeway Foods explained today: “The rights plan is intended to enable all shareholders to realise the full value of their investment in Lifeway.”
And further: “The rights plan will reduce the likelihood that Danone gains control of Lifeway through open-market accumulation or otherwise without paying all shareholders an appropriate control premium or without providing the board sufficient time to make informed judgments and take actions that are in the best interests of all of the company’s shareholders and other stakeholders.”
The rights issue will have a maturity of one year from 4 November 2024.
However, Lifeway Foods added: “The rights plan does not deter any offer to acquire the company from any party, nor does it preclude Lifeway’s board from considering an offer that is fair and otherwise in the best interests of the company’s shareholders.”
Danone’s takeover offer has been rejected in the midst of a long-running family dispute over control and leadership of the company.
In August, Ludmila and Edward Smolyansky, Lifeway Food’s largest investors, filed a consent statement to unseat the company’s current board of directors, including CEO Julie Smolyansky.
Ludmila and Edward – mother and brother of CEO Julie respectively – said at the time they were trying to bring in leadership “committed to revitalising the company with a strategic vision aligned with the best interests of its shareholders”.
