Maple Leaf Foods Investor Calls For Board Changes

Activist investor West Face Capi tal cal led for a special meeting of Maple Leaf Foods shareholders Dec. 3, saying it is concerned about how the company’s board of directors operates.

Investors have expected the hedge fund to push for changes since it bought a 10 per cent stake in Maple Leaf in August, and its move helped drive up the company’s shares by four per cent Dec. 3.

West Face, Maple Leaf’s second-biggest shareholder, called for the special meeting to allow shareholders to push for a new board with less influence from major investors, who include chief executive Michael McCain and his family.

West Face partner Thomas Dea said management and the board had rebuffed the fund when it raised concerns about board independence and corporate governance.

“We have concluded that the board needs to hear a strong message from shareholders that the independence and governance practices of Maple Leaf do not satisfy their expectations or today’s standards of good corporate governance,” Dea said in a statement.

A Maple Leaf spokesperson could not be reached for comment.

West Face bought its stake in the Toronto-based food processor from the Ontario Teachers’ Pension Plan. The pension plan had been the second-largest shareholder in Maple Leaf until it sold its 25 per cent stake late last month in a secondary offering for more than $362 million.

The biggest shareholder is McCain Capital Corp. with about 32 per cent.

“I think (West Face) was getting nowhere with the current directors,” said analyst Robert Gibson of Octagon Capital in Toronto. “They want the board to act, so now they’re saying the board isn’t independent enough.”

The current Maple Leaf board was assembled while McCain Capital had majority shareholder support through an agreement with Teachers’, but that arrangement expired in June, West Face said.

With Teachers’ gone, independent directors already hold majorities on the board and committees, Gibson said.

Maple Leaf is required under the Canada Business Corporations Act to set a meeting date within 21 days, after which West Face can call it, West Face spokesman John Lute said in an interview.

The meeting would allow shareholders to vote on five non-binding advisory resolutions, including moves to shrink the board’s size, ensure most board directors are independent and review its approach to executive compensation.

At least in theory, the appeal to shareholders shouldn’t affect Maple Leaf’s performance, Gibson said, although it will surely require attention from CEO McCain as the company carries out a C$1-billion plan to boost earnings.

McCain, however, is well versed in managing with distractions, having taken the company through a deadly meat recall in 2008, Gibson said.



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