The UK’s Premier Foods plc has written to shareholders ahead of a crucial annual general meeting stating its support for under-fire CEO Gavin Darby.
Hong Kong-based activist investor Oasis Management has criticised Darby’s performance and has called for him to be voted out at Premier’s AGM on 18 July.
Oasis is the Mr Kipling’s cakes and Oxo stock cube maker’s second-largest shareholder with a 9.3% stake in the business.
In a statement to the London Stock Exchange today (2 July) Premier said it had issued a circular to all shareholders rejecting Oasis’ “highly critical comments” about the company and its CEO.
“The board has confidence in Gavin Darby and firmly believes that he and the management team are best placed to run the business and execute the company’s strategy,” it said.
“Gavin Darby became the chief executive officer of Premier Foods in February 2013 at a time when the company was in serious financial difficulties. It had net debt of nearly GBP1bn (US$1.31bn), which was a ratio of six times net debt to EBITDA. On the day of his appointment, The Financial Times stated that Gavin Darby faced ‘a Herculean task’.
“Since then, Gavin Darby has been successfully transforming Premier Foods throughout a challenging industry back-drop by undertaking significant cost and efficiency initiatives, properly integrating the businesses which had previously been acquired, introducing modern sales and marketing processes and establishing positive relationships with customers.
“The business has progressed and is leveraging key strategic partnerships with Nissin Foods Holdings Co. (with noodles) and Mondelez International (with Cadbury cakes), which has substantially increased the rate of innovation and new product development and is driving rapid international expansion.”
Premier suggested the company’s most recent financial results demonstrate good progress.
“In 2017-18, the company reported its strongest rate of total sales growth in over five years, international sales growth of 25% and a reduction in the ratio of net debt to EBITDA to 3.6x,” it said.
“The board is committed to continuing its strategy of improving performance and reducing net debt, while working in parallel to identify other strategic opportunities to accelerate the company’s turnaround to create value for shareholders.”
It said should the Oasis proposal be successful, there is no certainty a manager with equivalent or superior skills could be recruited, at acceptable cost or within a reasonable period.
Keith Hamill, Premier’s chairman, said: “The board believes that Gavin Darby is running the company well. In contrast, the Oasis proposal offers no constructive solution to the challenges being addressed and involves the risk of creating instability at a time when continuity is important in completing the work being done.
“The board unanimously recommends that shareholders vote in favour of Gavin Darby’s re-election as CEO at the AGM.”
Premier and its CEO have also received the support of trustees of the company’s three biggest pension funds.
They wrote a letter to the company and the UK’s pensions regulator on Friday (29 June) in which they said they were “concerned” at the calls for Darby’s dismissal.
The trustees said “they wish to place on record that we consider the risks associated with a change in leadership at this current point could be destabilising from an employer covenant perspective”.
They warned the defined benefit pension scheme was “significantly underfunded” and said “anything which jeopardises our ability to deliver on past promises may result in out of cycle action by the trustees to protect members’ positions”.
Former Coca-Cola executive Darby became CEO of Premier in 2013.
just-food analysis from May 2018: Premier Foods gives grounds for (cautious) optimism