Danone Accuses Lifeway Foods CEO of Self-Dealing and Value Destruction
In a recent development, dairy giant Danone has accused kefir maker Lifeway Foods of allowing its CEO Julie Smolyansky to “engage in self-dealing waste and value destruction.” Danone plans to file a lawsuit against Smolyansky and the rest of Lifeway’s board for breaching their fiduciary duties to shareholders.
Background
The lawsuit stems from Lifeway’s board granting the CEO nearly 300,000 new shares of Lifeway stock without Danone’s consent. Danone, which owns 23.3% of Lifeway’s business, contends that this action violates an agreement reached between the two companies more than 25 years ago.
Danone has made multiple offers to buy Lifeway, with the most recent offer being $27 per share. However, Lifeway has been embroiled in a family dispute between the CEO and her relatives for years.
Allegations
Danone claims that Lifeway’s decision to grant additional shares to Smolyansky reflects the board’s prioritization of the CEO’s personal interests over those of the company and its shareholders. The food manufacturer alleges that Lifeway has wasted millions of dollars on Smolyansky, including supporting her litigation against her family and paying her and her husband outsized compensation packages.
Furthermore, Danone asserts that Lifeway’s board amended the CEO’s employment agreement to provide her with lavish severance and benefits that would dilute public shareholders in a change-of-control transaction.
Response
Lifeway claims that the shareholder agreement with Danone is invalid under Illinois state law and intends to pursue remedies to nullify the agreement. The company asserts that Danone’s proposal undervalues Lifeway and that Smolyansky’s leadership is critical to the company’s success.
Implications
If Danone were to acquire Lifeway, it would add the fast-growing kefir and probiotic products to its portfolio, complementing brands like Activia and Too Good yogurts. Lifeway’s focus on gut health and probiotics aligns with consumer trends, and its sales have seen significant growth in recent years.
While the legal battle between Danone and Lifeway unfolds, the outcome could have far-reaching implications for both companies and the broader dairy industry.
