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Danone Accuses Lifeway Foods CEO of Self-Dealing and Value Destruction
Danone, a major dairy company, has accused the CEO of kefir maker Lifeway Foods, Julie Smolyansky, of engaging in self-dealing, waste, and value destruction. In a letter dated December 30, Danone announced its plan to file a lawsuit against Smolyansky and Lifeway’s board for breaching their fiduciary duties to shareholders.
The legal dispute stems from Lifeway’s board granting Smolyansky nearly 300,000 new shares of Lifeway stock without Danone’s consent. Danone, which owns 23.3% of Lifeway, claims this action violates an agreement made over 25 years ago that required Danone’s approval for such transactions.
Amidst this conflict, Danone has expressed interest in acquiring Lifeway, with a recent offer of $27 per share. However, Lifeway has been embroiled in a long-standing family dispute involving the CEO and her relatives.
Allegations of Mismanagement and Misuse of Funds
Danone has criticized Lifeway’s board for prioritizing Smolyansky’s personal interests over those of the company and its shareholders. The food manufacturer alleges that Lifeway has wasted millions of dollars on supporting Smolyansky’s personal endeavors, including legal battles with her family, her generous compensation package, and her husband’s high salary.
Danone further claims that Lifeway amended Smolyansky’s employment agreement to provide her with excessive benefits that would dilute public shareholders in the event of a change of control. The granting of new shares to the CEO is seen as a move to devalue the company and benefit Smolyansky at the expense of other shareholders.
Lifeway, on the other hand, argues that the shareholder agreement with Danone is invalid under Illinois law and intends to challenge its validity. The company maintains that Danone’s acquisition proposal undervalues Lifeway’s business and that Smolyansky’s leadership is crucial to the company’s success.
Potential Impact on the Industry
Danone’s interest in Lifeway stems from the latter’s success in the fast-growing market for kefir and probiotic products. Lifeway’s focus on gut health and nutritious offerings aligns with consumer trends, making it an attractive target for acquisition. Lifeway has shown consistent growth and is projected to continue expanding its sales in the coming years.
Despite the ongoing legal battle and acquisition discussions, Lifeway remains committed to its standalone business plan and values its CEO’s leadership. The company is open to a sale at a fair price that reflects the true value of its business.