David­sTea founder re­gains con­trol

National Post (Latest Edition) - - FINANCIAL POST - Ross marow­its

MON­TREAL • Davids Tea’ s CEO re­signed Thursday af­ter los­ing a bat­tle with the com­pany’s co-founder that saw the en­tire board re­placed over the di­rec­tion of the strug­gling spe­cialty-bev­er­age re­tailer.

Chief ex­ec­u­tive Joel Sil­ver, who led an at­tempt to pre­vent a share­holder re­volt led by Her­schel Se­gal, quit af­ter the vote re­sults were an­nounced at the com­pany’s an­nual meet­ing.

Se­gal took over as ex­ec­u­tive chair­man and in­terim CEO and the com­pany said it will be­gin a search for a per­ma­nent chief ex­ec­u­tive to re­place Sil­ver, who was in the po­si­tion for lit­tle more than a year.

Fifty-four per cent of the votes cast at the share­holder meet­ing backed Se­gal’s slate of seven di­rec­tors over the man­age­ment nom­i­nees.

Se­gal pledged Thursday that the chain of 240 stores in Canada and the U.S. will be­come prof­itable within a year and fo­cus on its Cana­dian roots.

“We now have a lit­tle time to ex­am­ine ex­actly how we can get this com­pany back on track.”

Se­gal, a vet­eran re­tailer who also founded cloth­ing chain Le Chateau, said David­sTea has a great brand and prod­uct that has failed to find its foot­ing in the U.S.

“Af­ter six years of work­ing in it, not only did we not make it in the States be­cause there’s a dif­fer­ent cul­ture and a dif­fer­ent cus­tomer there and what we did was at the same time ne­glect Canada.”

Some U.S. stores might be closed but first David­sTea’s brand mis­sion has to be clar­i­fied and made ef­fi­cient to re­store prof­itabil­ity, Se­gal said in a brief news con­fer­ence.

Also elected to the board were cor­po­rate di­rec­tor Wil­liam Cle­man, Viau Foods pres­i­dent Pat De Marco, re­tired pro­fes­sor Lud­wig Max Fisher, for­mer MEC chief ex­ec­u­tive Peter Robin­son and Roland Wal­ton, for­mer pres­i­dent of Tim Hor­tons Canada and Le Chateau pres­i­dent Emilia Di Raddo.

The Mon­treal-based com­pany lost $30 mil­lion last year on $224 mil­lion of sales. The losses in­cluded one-time sep­a­ra­tion costs for a for­mer CEO, im­pair­ment charges and the im­pact of oner­ous con­tracts.

“We’re now go­ing back to look at what we need for Canada,” Se­gal said. “The U.S. sit­u­a­tion is on hold.”

Se­gal said he hasn’t looked at pri­va­tiz­ing or sell­ing the com­pany, which he in­sisted still has a fu­ture. Tea is a so­cial, calm­ing bev­er­age that is a de­par­ture from sugar drinks, en­ergy bev­er­ages and cof­fee jolts, he said.

How­ever, not many peo­ple have fig­ured out how to make a tea busi­ness suc­cess­ful, he said, point­ing to Star­buck’s, which closed its Tea­vana chain in Jan­uary about five years af­ter pur­chas­ing the di­vi­sion for US$620 mil­lion.

Se­gal’s hold­ing com­pany Rainy Day In­vest­ments Ltd., which owns about 46 per cent of the out­stand­ing shares, was up against three in­vest­ment com­pa­nies that


to­gether con­trol 36.5 per cent of the shares. They ac­cused Se­gal of try­ing to ac­quire the com­pany with­out pay­ing a pre­mium.

Ben­jamin Gisz, di­rec­tor of TDM As­set Man­age­ment Pty Ltd, which has 12.2 per cent of David­sTea shares, said af­ter the vote that he wasn’t sur­prised by the re­sult.

“We hope the board does well, we just never sup­ported Mr. Se­gal as be­ing the leader of the board or the man­age­ment team,” he said in an in­ter­view.

“We just want to see this brand thrive and the key to do­ing that is cre­at­ing an en­vi­ron­ment where great peo­ple can come to the busi­ness and the key to that is to make sure that the man­age­ment team is given a clear man­date from the board, clear ac­count­abil­ity and a plan to ex­e­cute.”

David­sTea has been pub­licly traded since June 2015, when it listed on the Nas­daq as part of an ex­pan­sion plan.

Shares of David­sTea have plum­meted from nearly US$30 in 2015 to just US$4.12, up 4.4 per cent in trad­ing Thursday on the Nas­daq.

Joel Sil­ver

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