Lifeway Foods, Inc. has rejected Danone’s takeover bid and moved to adopt a plan that would reduce the likelihood of the dairy major taking control of the company through open market accumulation – or without paying all shareholders an appropriate control premium.
Lifeway’s board of directors thinks Danone’s $283m bid ‘substantially undervalues’ the fermented dairy producer and has moved to adopt a limited-duration shareholder rights plan under which it would distribute one preferred share purchase right for each outstanding share of Lifeway common stock to shareholders of record at the close of business on November 18, 2024.
Initially, these rights will not be exercisable; but will become such if 20% of the company is acquired in a transaction not approved by the board.
Lifeway is due to report its Q3 2024 results on November 14.
On September 23, Danone SA submitted a bid of around $283m to Lifeway Foods, offering $25 per share in cash.
The bid was supported by Edward and Ludmila Smolyansky, relatives of company CEO Julie Smolyansky, who said in a statement that the offer ‘represents a substantial premium over Lifeway’s recent share price’, calling the potential transaction ‘a unique opportunity to enhance value for shareholders’.
Edward, Julie’s brother, and Ludmila, her mother, are significant shareholders but not on the board of directors. The duo have been trying to oust the CEO from the role, most recently by filing a consent statement with the SEC and citing ‘significant and repeated failures of corporate governance’.
Tensions have been brewing within the family-run business since 2022, when Ludmila and Edward first demanded the removal of the CEO and a strategic review of Lifeway Foods.
In summer 2022, an agreement was reached, with Edward and Ludmila agreeing to withdraw their director nominations while the board agreeing to look at strategic alternatives for the company.
On November 6, the company’s board of directors rejected Danone’s $283m bid.
Meanwhile, the company launched an expanded kefir and farmer cheese distribution deal in Dubai and UAE, following a similar distribution deal for South Africa.
Shipping of the four SKUs – 32oz Lifeway Kefir, 8oz Lactose-Free Lifeway Kefir, ProBugs and farmer cheese – begins in Q4 2024 with the products set to be available in supermarkets in Dubai and across the Emirates.
According to the firm’s FY23 results, net sales were $160.1m for the year ended December 31, 2023, an increase of $18.6m or 13.1% versus prior year.
Lifeway reported net income of $11.4m or $0.77 per basic and $0.75 per diluted common share for the year ended December 31, 2023 compared to net income of $0.9m or $0.06 per basic and diluted common share during the same period in 2022.