Maple Leaf Gives West Face CEO A Seat On Board

Maple Leaf Foods appointed the head of investment fund West Face Capital to its board Feb. 3, bringing in a leading activist shareholder who has been critical of corporate governance at the Canadian food processor.

West Face chief executive Gregory Boland joins the board six months after the Torontobased investment fund took a stake in Maple Leaf and became its second-largest shareholder.

West Face, which owns 11.4 per cent of Maple Leaf, had asked for a special meeting of shareholders to vote on five non-binding resolutions, including moves to shrink the board’s size, to ensure most directors are independent, and to allow shareholders to regularly review Maple Leaf’s approach to executive compensation.

As part of an agreement with West Face, Maple Leaf said it will reduce the number of directors to be nominated for election at the April 28 annual meeting to 10 or 12 from 14.

West Face got most of what it had wanted, and it is believed the Maple Leaf board made the decision after other shareholders said they supported some of the fund’s proposals.

“I like all involved and I am glad they reached a solution,” Tim McElvaine, president of Maple Leaf shareholder McElvaine Investment Management Ltd., told Reuters. “I think this is a strong step in the right direction.”

West Face has dropped its request for a special meeting, and its resolutions will not be considered at the company’s annual meeting, Maple Leaf said.

“Mr. Boland’s appointment is part of an ongoing process to make changes in the composition and structure of our board that reflect the recent significant changes in our shareholder base,” said James Hankinson, chairman of Maple Leaf’s governance committee.

West Face declined to comment.

Maple Leaf has been hit hard in recent years by the rising Canadian dollar, a run-up in farm commodity prices, and a deadly listeria contamination of some of its deli meats three years ago. The outbreak was linked to at least 20 deaths.

Maple Leaf CEO Michael McCain drew praise for his straightforward approach to dealing with the listeria crisis, however the company’s shares still trade below its pre-outbreak levels, frustrating investors and leading to suggestions that the McCain family might lose its control of the company.

Maple Leaf’s biggest shareholder is McCain Capital Corp. with about 32 per cent.

Boland becomes one of the board’s most powerful directors, with positions on the corporate governance and compensation committees. He will also join any committee Maple Leaf may form to deal with corporate strategy.

Bringing West Face on to the board likely means incremental changes that will make Maple Leaf more profitable, said analyst Robert Gibson of Octagon Capital.

He said it’s unlikely to stall the company’s $1.29-billion, multiyear plan to expand some meat-processing plants while closing others in a bid to become more competitive and boost earnings.

“I don’t think they’re going to change (Maple Leaf’s) plans. They just want to make the company more profitable, and this will definitely do that,” Gibson said.

West Face bought its stake in August after the Ontario Teachers’ Pension Plan sold its 25 per cent stake in a secondary offering for more than $362 million.

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Ithinkthisisa strongstepinthe rightdirection.”

– TIM MCELVAINE

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