Danone is preparing litigation against kefir maker – and takeover target – Lifeway Foods, alleging the business broke a shareholder agreement between the two companies.
An investor in Lifeway since 1999, Danone tabled takeover bids for the company in September and November, both of which were rejected.
On 30 December, the French giant wrote to Lifeway’s board claiming the US business and its CEO, Julie Smolyansky, had breached a deal dating back to the Activia maker’s investment in the company.
Danone said a week earlier Smolyansky had disclosed the Lifeway board had granted her nearly 300,000 shares, a move it says violated their agreement.
“In her securities law filing, Ms. Smolyansky acknowledged that this issuance required Danone’s consent under the shareholder agreement and she further admitted that such consent was not granted,” Shane Grant, Danone’s deputy CEO, told Lifeway’s board.
In the letter, published via the US Securities and Exchange Commission, Grant said the awarding of the shares was “therefore ‘null, void and of no force and effect’ and Danone will take all necessary steps to enforce its rights”.
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By GlobalData
Lifeway claims the shareholder agreement violates state law in Illinois, where the company is based.
In September, Danone, which already owned just over 23% of Lifeway, proposed acquiring the rest of the business for $25 per share – a 59% premium over the stock’s then-three-month volume weighted average price.
Lifeway rejected the offer on 5 November, arguing the bid undervalued the business.
Danone raised its offer to $27 per share but that was also rebuffed.
However, later in November, Lifeway said its board was “not opposed” to a potential sale of the company.
Grant said Lifeway had “belatedly acknowledged that it could not continue to stave off value-maximizing proposals and conceded that it would be willing to consider a sale of the company”. He added: “To date, Danone has seen no convincing evidence that this is the case.”
The award of shares to Smolyansky was a move to “destroy shareholder value and ignore Danone’s long-established contractual rights”, he said.
“Having seen the heightened potentiality of a sale of the company, the board has seemingly greenlit a value-destroying gifting program for the CEO in blatant violation of the shareholder agreement.”
In the letter, Grant, also the CEO of Danone’s business in the Americas, said Lifeway’s board had also changed Smolyansky’s severance package and “other benefits that will further dilute the public shareholders in any change-of-control transaction”.
He also pointed to the money Lifeway had spent on recent litigation between its CEO and her mother and brother – who also own shares in the business and have backed Danone’s attempts to acquire the group.
Responding to Danone’s accusations, a Lifeway spokesperson told Just Food: “The agreement entered into with Danone is in clear violation of Illinois law and has enabled Danone to exploit this relationship in contravention of the law for the benefit of Danone and to the detriment of Lifeway.
“Lifeway’s reported quarterly performance in 2024 shattered all historic benchmarks for the company and the board and management are focused on continuing to deliver superior value to shareholders and customers. Lifeway will be responding to the recent Danone letter in due course.”
