Key Lifeway Foods investors, Edward and Ludmila Smolyansky, have called for the creation of an “independent special committee” to evaluate and negotiate Danone‘s latest takeover offer.
The announcement follows Lifeway’s rejection of an updated bid of $27 per share for the shares not already owned by Danone, the French dairy conglomerate.
Danone, which already owns 23.3% of Lifeway, claims the improved offer represents a 72% premium over the three-month volume-weighted average price of Lifeway’s shares.
Edward and Ludmila Smolyansky, who control approximately 29.7% of Lifeway’s outstanding shares, have expressed support for the offer.
In a statement, they highlighted Lifeway CEO Julie Smolyansky and her spouse Jason Burdeen’s unwillingness to sell the company which makes kefir.
The CEO believes a sale to Danone “would destroy her family’s legacy,” said Edward and Ludmila, Julie’s brother and mother, respectively.
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They added that “significant personal conflicts” raise questions about the CEO’s capability to “fairly evaluate” Danone’s proposal.
According to the statement, Burdeen told Edward Smolyansky that CEO Julie Smolyansky would not permit a sale of Lifeway unless her mother transferred her more than one million shares.
As a result, the critical investors have called on the board to form an “independent special committee” to handle and negotiate any change of control transactions.
The Smolyanskys have also urged Lifeway’s board to exclude Burdeen from the evaluation “given his spouse’s conflicts and his conduct in corporate matters”.
Furthermore, they urged the board to disclose Kroll’s valuation analysis for comparison with Danone’s offers and to release unredacted deposition transcripts from two Lifeway cases, allowing shareholders to evaluate the board’s diligence and decision-making.
Edward Smolyansky said, “Neither Ludmila nor I have seen any analysis provided by Kroll, and as significant shareholders we want to understand the basis on which the board is characterizing $27 per share as substantially undervaluing Lifeway.”
Lifeway hired advisers at Kroll in 2023, to help the company explore strategic options to “maximise value” for investors.
According to the key investors, Lifeway is also considering legal action against Danone to invalidate a stockholder’s agreement that enables Danone to veto stock grants to the CEO, and allows it to have the right of first refusal over certain stock transfers.
While Lifeway argues these provisions are not permissible under Illinois law, the mother-son duo stated that it previously looked to enforce such a stakeholders agreement “multiple” times.
In a statement last week, Lifeway said the new bid was “not in the best interests of the company and its shareholders or other stakeholders”.
Lifeway plans to remain “focused” on its plans to expand kefir’s reach to more households while also venturing into “adjacent categories.”
Aside from kefir drinks, the group also produces frozen kefir and cheeses under its Farmers Cheese brand. While its main market is the US, it also sells in Mexico, other Latin America markets, Ireland, South Africa, the UAE, and France.
