Premier Foods activist Oasis urges Nissin to not support CEO at AGM
24 JUN 2018
Activist investor Oasis Management is urging Nissin Foods Holdings [TYO: 2897] to not help re-elect Premier Foods’ [LON: PFD] chief executive at the latter’s upcoming AGM because Nissin is not free of conflict of interest, Oasis’s Chief Operating Officer Phillip Meyer told this news service.
Premier Foods, known for its Mr Kipling cake brand, has underperformed because of management’s poor leadership, Meyer said, also emphasizing that Chief Executive Gavin Darby is a key culprit. Premier spurned a 65p/share offer from McCormick & Company [NYSE:MKC] in 2016 and instead brought on Nissin as a 20% shareholder and strategic partner; it now trades at 38p/share.
Hong Kong-based Oasis, the company’s second-largest shareholder with a stake of about 10%, believes that Nissin should abstain from voting or else vote against Darby’s re-election at the AGM on 18 July, Meyer said.
Because of its large stake in Premier, its valuable commercial relationship with the company, and because it has a representative on the board, Nissin is a de facto poison pill for any management change, Meyer said.
Meyer also charged that Nissin’s support for Darby would represent a conflict of interest. He said that it is his understanding that Darby had one-on-one deal negotiations with Nissin for potential transactions between Premier and Nissin.
Oasis’s timing is strange, a person familiar with Premier said, as the British food manufacturer is showing signs of improvement, with – at last – sales growing and net debt falling. Further, Oasis had previously sought and won a seat on Premier’s board, which it then surrendered last March, the person familiar noted.
Meyer explained that Oasis's non-executive director stepped down in March because Oasis was unhappy with the way Premier was being managed and the decision that were made.
Minority shareholders
Oasis has spoken to many shareholders and they have been supportive of its campaign, Meyer said. Many minority shareholders of Premier will vote against the re-election of Darby at the AGM on 18 July, according to Meyer.
Premier is likewise reaching out to its shareholders to drum up support for Darby, the person familiar said. It is too early to say whether it has the support of most minority shareholders, the person said.
“If Nissin abstains, it is almost certain that Gavin Darby will not be re-elected,” said Meyer. Oasis has already written a letter to Nissin outlining its concerns and encouraging the shareholder to vote against the CEO or at least abstain from voting at the upcoming AGM, he explained.
“Even if Nissin votes in favour of Gavin Darby, we think that a final result will reveal there is a high number of minority shareholders who are very unhappy with Gavin Darby,” he said.
A proxy voting report from Glass Lewis, issued 12 June, and a note from Jefferies, published on 22 June, have recommended that shareholders support Premier’s board.
Oasis supports strategic transactions
Meyer said that Oasis has been supportive of any strategic transactions involving Premier, which could include Nissin raising its stake or taking it private, or the disposal by Premier of brands or business lines.
If McCormick returns with a fair bid for Premier, Oasis will likely support it, said Meyer. He also believes that many other minority shareholders feel that Premier should have entertained McCormick's approach.
If a new CEO is appointed, and with new Chairman Keith Hamill at the helm, Premier will be better positioned to consider strategic transactions or other changes to its business plan that will increase value for all shareholders, said Meyer.
Alex Whitehouse, Premier’s managing director, could serve as its interim chief executive while an external search takes place, Meyer added.
Premier and Nissin declined to comment.