Maple Leaf Foods’ CEO is poised to become the biggest shareholder in the company in a new governance agreement that includes a standing “poison pill” plan to ward off any snap hostile takeover.
The company said last week its board of directors has approved changes to the company’s governance structure which will see CEO Michael McCain acquire all the shares now held by his family’s holding company, McCain Capital Corp. (MCC).
MCC by itself owns about 31.3 per cent of the Toronto-based food processing giant. When its shares go to Michael McCain, he would own or control about 31.9 per cent of Maple Leaf, the company said in a July 28 release.
McCain’s position would also include the purchase of about 550,000 shares — a stake of about 0.4 per cent — from the personal investment company of his father Wallace, who died in May.
The governance deal would then allow Michael McCain to nominate a number of directors to the Maple Leaf board proportional to his ownership stake — which at the board’s current size would allow him to put in four nominees.
West Face Capital, a Toronto investment management firm that bought an 11 per cent chunk of Maple Leaf in 2010 from the Ontario Teachers Pension Plan, gets to nominate one director.
The new governance deal calls for all other board members to be “independent” of Maple Leaf management, the McCains and West Face, the company said.
“Not in response”
Maple Leaf’s board last week also approved adoption of a “poison pill” policy, which it and most other publicly-traded companies that use them describe as a “shareholder rights plan.” Such a plan is usually adopted as a way to block any unasked-for takeover bid.
However, Maple Leaf last week stressed that its new rights plan, which took effect immediately, “was not adopted in response to any actual or anticipated transaction,” but rather follows a similar previous plan that was allowed to expire at the end of December 2010.
Maple Leaf said July 28 it plans to call a special meeting of its current shareholders to approve the new poison pill plan within six months, after which it would need to be reconfirmed at the company’s regular annual shareholder meeting in both three and six years’ time, or it would “terminate.”
The plan would also automatically expire in six months from now if shareholders don’t approve it by then. If it’s approved now and in both three and six years’ time, it would not expire until the shareholders’ meeting in 2020.
The new poison pill plan would be triggered if anyone or any company buys up a stake of more than 20 per cent of Maple Leaf stock, unless the offer to purchase is made to all shareholders and is on the table for at least 60 days.
In swallowing the pill, so to speak, Maple Leaf’s plan would automatically make new shares available to every other stockholder at a 50 per cent discount, diluting the hostile bidder’s stake and making his or her takeover play unattractive.
Maple Leaf last week booked profit of $24.58 million on $1.238 billion in sales for its second quarter ending June 30, up from $4.93 million on $1.271 billion in the year-earlier period.
“We are successfully managing the impact of rising costs through price increases and cost reduction initiatives, and our value creation plan is on track and contributing to earnings,” McCain said in a separate release.