CHICAGO, Nov. 22,
2024 /PRNewswire/ -- Edward
and Ludmila Smolyansky ("Founding Shareholders"), who
together exercise voting control with respect to approximately
29.7% of the outstanding shares of common stock of Lifeway Foods,
Inc. (NASDAQ: LWAY), today called for Lifeway's board of directors
to take several actions, including immediately establishing an
independent special committee to evaluate and negotiate a
transaction with Danone or other potential buyers.
This follows a proposal by Danone North America PBC to acquire
all outstanding shares of Lifeway that Danone does not already own
for $27 per share in cash.
Rather than negotiate with Danone in response to its generous
proposal, Lifeway quickly rejected it outright. This is consistent
with the prior statements by CEO Julie
Smolyansky and Jason Burdeen,
her spouse who also serves as the CEO's chief of staff, that they
would never allow a sale of Lifeway.
As disclosed in Lifeway's SEC filings, rather than explore a
value-maximizing transaction, Lifeway is now threatening to file a
lawsuit against Danone to invalidate a stockholders agreement that
allows Danone to veto any stock grants to the CEO and gives Danone
a right of first refusal over certain stock transfers by the other
parties to the agreement. Lifeway claims that certain provisions of
the stockholders agreement are impermissible under Illinois law, even though Lifeway has
previously sought to enforce that very stockholders agreement on
multiple occasions.
The Founding Shareholders are calling for Lifeway's board of
directors to take the following actions:
- Establish an Independent Special Committee Authorized to
Negotiate a Sale of the Company and Make Its Approval Subject to a
Vote by Shareholders
The CEO has communicated that she will not allow a sale of the
company, telling others that a sale to Danone would destroy her
family's legacy. In addition, her spouse, Mr. Burdeen, has told
Edward Smolyansky that the CEO would
not allow a sale of the company unless Ludmila Smolyansky transfers more than 1 million
shares to her. Julie Smolyansky's
theory for why she is owed these shares is described in a court
pleading she filed in the Circuit Court of Cook County.
These significant personal conflicts call into question the
CEO's ability to fairly evaluate Danone's proposal in accordance
with her fiduciary duties. Accordingly, the Founding Shareholders
urge the board of directors to take control of the process by
establishing an independent special committee, authorized to
evaluate and negotiate any change of control transaction, and to
retain its own advisors.
- Preclude Jason Burdeen from
Any Involvement in Evaluating or Responding to Danone's Proposal
Given His Partiality, as Recently Recognized by a Federal
Judge
For years, Lifeway's board has relied on Jason Burdeen to serve as its primary point of
contact with its outside advisors, including lawyers and investment
bankers. The Founding Shareholders urge the Lifeway board of
directors to ensure that Mr. Burdeen is not involved in their
evaluation of Danone's proposal, given his spouse's conflicts and
his conduct in corporate matters.
Lifeway has filed two lawsuits against the Founding Shareholders
in the last two years, each of which Lifeway then dismissed to
avoid trial or a ruling on the merits of its baseless claims. In
the case Lifeway filed this year in the U.S. District Court for the
Northern District of Illinois
(24-c-2601), a federal judge made the following statements about
Mr. Burdeen after Lifeway had designated him as its official
corporate representative to testify on its behalf:
"Mr. Burdeen has little credibility left in front of this Court
based upon the multiple declarations he has filed in this case and
what he said in his deposition. His story keeps changing. His story
under oath keeps changing, and that diminishes his
credibility."
Edward Smolyansky commented, "It
is shocking that the Board did not terminate Jason Burdeen after his conduct in the lawsuit
filed by the company against Ludmila and me, and it is concerning
that the Board continues to delegate key responsibilities to Mr.
Burdeen. Is the Board unaware of the federal judge's ruling, or
does it simply not care? I am not sure which would be worse."
- Disclose Any Reports by Kroll
Lifeway publicly disclosed in June
2023 that it hired Kroll as its financial advisor to assist
the board's ACG Committee in exploring strategic alternatives.
So that shareholders have an opportunity to understand the
board's recent refusal to negotiate with Danone and its claim that
"Danone's revised proposal at $27-per-share substantially undervalues Lifeway,"
the Founding Shareholders call for the board to disclose to
shareholders any valuation analysis that might have been provided
by Kroll to the ACG Committee so it can be compared to Danone's
offers.
Edward Smolyansky said, "Neither
Ludmila nor I have seen any analysis provided by Kroll, and as
significant shareholders we want to understand the basis on which
the board is characterizing $27 per
share as substantially undervaluing Lifeway."
- Agree to Allow the Dissemination of All Deposition
Transcripts in the Two Lawsuits Lifeway Filed Against the Founding
Shareholders
The Founding Shareholders call for Lifeway to agree to allow
them to disseminate unredacted transcripts from the depositions
taken in the two cases filed by Lifeway, so that shareholders can
evaluate for themselves whether the testimony of the directors
indicates that the board is acting with due care and has been
adequately informed.
"While the Company's value continues to erode, Julie is busy
launching copycat Kefir drinks on other continents that will never
see the light of day under her tenure. Lifeway's shareholders
deserve transparency, accountability, and leadership that
prioritizes their best interests. Lifeway's shareholders deserve
better," said Edward Smolyansky. "If
the board of directors believes that management has a more
compelling strategy for Lifeway and its shareholders, then it
should explain that to Lifeway's shareholders in detail. But given
Julie's expressly stated personal opposition to any transaction, my
view that Julie and Mr. Burdeen exercise significant control over
the board, and the repeated stock sales by the members of Lifeway's
executive management team over the past year — CEO Julie Smolyansky, CFO Eric Hanson and Senior EVP of Sales Amy Feldman
— it would be very hard for me and other Lifeway shareholders to
believe that management has any such strategy. Instead, they have
touted growth in the company's share price — which has been driven
by our efforts to seek change and by the terms of Danone's
proposals — and stated that they desire to continue their
'momentum.'"
For more information, visit LifeBackToLifeway.com
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SOURCE Edward and Ludmila
Smolyansky