Activist calls for dramatic change at food company
Activist shareholder Elliott called on GEA Group to appoint a new CEO quickly, replace chairman Helmut Perlet and buy back shares, adding to pressure for speedy and sweeping changes at the German foodprocessing company.
“Elliott urges the company to announce a new CEO without further delay and … invites the new CEO to commence a strategic review in which all options to enhance stakeholder value should be considered,” Elliott, which holds about 5% of shares in GEA, said in a statement on Monday.
GEA, whose machines make milk products, instant coffee and chicken nuggets, is struggling to win back investor support after cutting its profit targets in both 2016 and 2017.
RESTRUCTURING
CEO Juerg Oleas, who said in March he would not stand for another term, has initiated a restructuring plan but measures taken so far will take about two years to gain traction, which is too long for some investors.
Oleas is due to stay on until early 2019.
In addition, GEA’s finance chief, Helmut Schmale, agreed in April to take early retirement.
“By acting decisively and swiftly in the wake of the recently announced departures of its CEO and chief financial officer, and getting the right leadership and governance in place, GEA can regain investors’ trust and avoid a lengthy period of business drift and market uncertainty,” Elliott said.
It also said GEA should refresh shareholder representation on the supervisory board, including by replacing Perlet, to combat what it said was excessively long board tenure and a disconnect between executive pay and GEA’s performance.
GEA should also launch a substantial share buy-back, Elliott said, saying its liquidity profile and low share price had created a good opportunity to return cash to shareholders without risking its credit rating.
GEA’s stock has lost 29% of its value so far in 2018 and is down more than 40% from a record €50.17 in August 2016.
In June Elliott raised its stake in GEA to just over 5% from 3%, making it the fifth-biggest investor behind Kuwait Investment Office, MFS Investment Management, Blackrock, and Albert Frere.
GEA ... IS STRUGGLING TO WIN BACK INVESTOR SUPPORT AFTER CUTTING ITS PROFIT TARGETS IN BOTH 2016 AND 2017