Sobeys rearranges control of Empire
The founding Sobey family isn’t giving up control of Empire Co. Ltd., the publicly traded parent company of the Sobeys Inc. grocery chain, but the family made an interesting transaction this week.
The family announced in a news release that it had consolidated its controlling interest in Empire Co. Ltd. Class B common shares, beneficially owned by the three branches of the Sobey family, into a single holding company called Class B Holdings Ltd. or CBHL.
Class B Holdings Ltd. acquired an aggregate of 90,933,092 or 92.66 per cent of the outstanding Class B common shares from DFS Investments Ltd., a holding company controlled by David F. Sobey; Dunvegan Holdings Ltd., a holding company controlled by the children of the late William Sobey; and Sumac Holdings Ltd., a holding company controlled by Donald R. Sobey.
Class B Holdings Ltd., together with its shareholders and affiliates, now owns or controls 90,971,444 Class B common shares representing about 92.70 per cent of the outstanding Class B common shares.
The three branches of the Sobey family continue to separately hold non-voting Class A shares of Empire outside of Class B Holdings Ltd., and insider and other regulatory filings are being updated to reflect the consolidation, according to the company.
“The three families believe that the consolidation of their Empire voting shares in CBHL will create a governance structure to better administer their interest in Empire,” Stewart Mahoney, president of Class B Holdings Ltd., said in the news release.
Class B Holdings Ltd., its shareholders and their affiliates have no intention to undertake any other transactions relating to the ownership of Empire, it was stated in the company news release. However, subject to regulatory limitations, the controlling shareholders may acquire or continue to hold Empire shares in the normal course of their investment activities.
Sylvain Charlebois, dean of the faculty of management at Dalhousie University, told me in an interview Thursday he doesn’t know the specific reason for the transaction by the Sobey family, but usually public companies with a family involved, such as Bombardier and Sobeys, tend to do these things for reasons.
“The first obvious reason would be to attract more capital, so to actually attract investors. That could be a reason,” said Charlebois. “So, looking at the new year, looking at reinvesting in the company, perhaps they want to make the shares more attractive and make sure that markets are interested in the company over the short term at least.”
He suspects the move on Thursday to create a single holding company will actually give the Sobey family less influence than it used to have.
“It’s more about optics and influence, as far as I’m concerned,” Charlebois said. “Going back to Bombardier, the Beaudoin family has too much influence on Bombardier and it’s affecting its ability to expand. I suspect the Sobey family wants to put the company’s best foot forward going into the new year or over the next 18 months.”
“It’s probably quite critical, the grocery business is in flux right now especially given the bad press (about the bread pricefixing scandal) in recent days. I suspect they want to make sure they have the capital needed to equip itself accordingly into the new year,” he said.
Another potential reason for the transition to a single controlling holding company, he said, may be with a thought about the next generation by making sure the company remains democratic while allowing the children to have some control.
Nowadays, the operation of a public company is quite complicated, he said.
“You have to be much more transparent and you have to show that any shareholder is influential or meaningful, not one shareholder is more important than another. You’re seeing more and more of these shareholder advocates basically want more democracy, so that’s kind of in line with what more shareholders are looking for,” said Charlebois.