Events in financial markets tend to have a certain choreographed rhythm to them – not as pretty as Golden Globe winner La La Land, to be sure, but fairly well-established nonetheless – so it was a surprise to see shareholder activism working in reverse in Australia this week.
Bellamy’s Australia – a manufacturer of baby food formulas with a market cap a little over U.S. $300 million – fired its CEO, Laura McBain on Wednesday, marking what the Australian Financial Review called “Blood in the boardroom as CEO killing season opens.” McBain’s dismissal followed the failure of a shift in strategy from indirect to direct retail in China, but it hasn’t been a case of shareholders calling for heads to roll you might expect from such controversies as Performance Sports Group or Valeant Pharmaceuticals International. In fact, a coalition of shareholders have lent support to McBain, including businesswoman Jan Cameron, who has called a special meeting to replace two-thirds of the board.
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Unsurprisingly, there had been pretty keen shareholder interest in the board’s approach to the company’s financial problems – which are expected to reduce earnings before income and tax to AU$22-26 million from AU$54 million last financial year. Bellamy’s board hasn’t exactly taken shareholders by surprise, with problems emerging in November and triggering a 45% decline in the stock price even before this week’s actions. But it has sprung a number of changes at once, promoting Chief Operating Officer Andrew Cohen as acting CEO and announcing a review of all existing positions in the executive team.
Engagement attempts leading up to the announcement came to nought, leaving Bellamy’s with a potential proxy contest on its hands. It’s early to say which side has the better arguments at this early stage, but such divergent views are unlikely to be resolved easily. With activism continuing at elevated levels – 59 & 60 companies targeted in each of 2015 and 2016 respectively, compared to just 50 in 2014, according to Activist Insight data, Bellamy’s example will be closely watched.
Article by Activist Insight