Liquor chain to undergo changes following proxy fight
A dominant liquor store chain in Alberta is expected to undergo a big transformation — including renovations and rebranding at all Canadian stores — when new directors take control of the board following a bitter proxy fight.
Edmonton-based Liquor Stores N.A. Ltd., North America’s largest publicly traded specialty alcohol retailer, has for weeks attempted to fend off a challenge from its largest shareholder seeking to replace six of eight board members with its own nominees.
The battle with Toronto-based PointNorth Capital, a private equity investor with a roughly 10-per-cent stake in Liquor Stores, was highly acrimonious and even led to a complaint with Alberta’s securities watchdog over a socalled vote-buying scheme by the retailer.
PointNorth, which had argued Liquor Stores suffers from diminished shareholder returns, high costs and declining same-store sales in Canada, emerged victorious in the month-long proxy fight Monday. Liquor Stores announced six of its board members, including chairman Jim Dinning, would no longer seek re-election at the company’s annual meeting Tuesday, clearing the way for all of PointNorth’s nominees.
The retailer, which declined to comment, said in a release it reached its decision after reviewing shareholder votes already counted, which suggests PointNorth’s campaign for a transformation resonated with stockholders.
PointNorth also declined an interview and instead issued a brief statement thanking fellow shareholders for their support of the company’s new strategy.
Pending Tuesday’s vote, the new board will be charged with carrying out PointNorth’s strategy for Liquor Stores, which includes cutting labour and other costs, renovating all Canadian stores and rebranding them under a single banner. The company owns 250 stores in two provinces and four states, though most of them, 177, are in Alberta.
PointNorth said the retailer has a confusing array of brands, including Liquor Depot, Liquor Barn and Wine and Beyond, resulting in “inefficient marketing.”
Liquor Stores issued 10 news releases in the past month warning shareholders against PointNorth’s plan, which it called dangerous. The retailer said the dissident plan would cut operating profits by $10 million while slashing the company’s share price by 24 per cent due to what it calculated as lost business from store renovations, reduced product selection and lost sales as a result of fewer staff.
Liquor Stores also took aim at the nominees themselves, arguing they are “unqualified and lack independence from PointNorth,” which the shareholder denies.
In its bid for shareholder support, Liquor Stores disclosed it would financially compensate brokers and advisers if their retail clients voted in favour of management’s preferred directors, as long as the entire slate was elected.
The shareholder advisory firm Glass Lewis said in a report on the Liquor Stores proxy fight that PointNorth had failed to make the case for a complete shakeup of the retailer’s board.
But the advisory group said the current board should be held accountable for the “vote-buying scheme,” recommending that shareholders vote against Dinning, while approving the rest of the slate, leaving room for a single PointNorth nominee. Dinning declined to comment. Arguing the scheme was against the public interest, PointNorth filed an application with the Alberta Securities Commission seeking to block any payments and have Liquor Stores reprimanded for the move. The securities commission said Liquor Stores did not violate any securities laws.
Liquor Stores shareholders will gather for the company’s annual meeting in Edmonton Tuesday.