Lifeway Foods has cancelled a controversial shareholder rights’ plan days before an investor meeting will vote on the make-up of the company’s board.
The so-called ‘poison pill’ measure, in place since 2024, was abandoned in the wake of proxy advisory firm Institutional Shareholder Services (ISS) recommending shareholders vote against Lifeway’s slate of nominees at the meeting on 17 June.
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In a statement yesterday (8 June), Edward Smolyansky, Lifeway’s largest shareholder and the brother of CEO Julie Smolyansky, accused the company’s board of “reactive governance”, saying the board scrapped the plan only when “external pressure leaves no alternative”.
Approached by Just Food, Lifeway said the rights plan was “designed to address a specific set of circumstances that existed at the time it was adopted” and added: “With those circumstances having changed materially, the board concluded the plan was no longer necessary and redeemed the rights.”
Lifeway adopted the rights plan in November 2024 after turning down takeover interest from Danone. last year, the company decided to extend the shareholder rights plan until 29 October 2026.
At the time, Mr. Smolyansky, a long-time, vocal critic of governance at Lifeway, described the extension as the “most brazen example of board and management entrenchment”, adding it was about “protecting control” of the business.
The rights plan was originally adopted to thwart acquisition bids for the business.
French dairy major Danone made two takeover offers for Lifeway in 2024, bids the US group turned down.
The relationship between Lifeway and Danone – which first invested in the business in 1999 – became strained after Lifeway rejected the bids.
However, the companies signed a “co-operation” deal in September last year. Under that agreement, Lifeway pledged to “refresh” its board and separate its chair and CEO roles, while both parties agreed to “stay” litigation between the two companies.
In April this year, Lifeway said it would reduce the size of its board from eight to seven directors at its upcoming AGM.
Last month, Danone announced the sale of its entire stake in Lifeway.
On 3 June, Lifeway nominated long-serving director Jason Scher for re-election, saying he provides “historical knowledge and continuity”.
In an SEC filing, the company added: “Accordingly, the board has nominated Mr. Scher to stand for re-election as director of the company at the annual meeting and determined that the size of the board should continue to be eight directors after election of directors at the annual meeting.”
In a statement yesterday, Mr Smolyansky said the decision to pull the poison pill after the ISS recommendation and the renomination of Scher “raise fundamental questions about accountability, transparency, and credibility” at Lifeway.
He is calling on shareholders to vote against the Lifeway slate. “A substantial vote against the incumbent directors would send a clear message that shareholders expect governance commitments to be honoured, shareholder rights to be respected, and accountability to be more than a slogan,” Mr Smolyansky added.
Lifeway said: “Mr. Smolyansky has publicly opposed the company’s board and management since his termination from the company and shareholders can evaluate his comments in that context. Our focus remains on executing our strategy, delivering results and creating long-term shareholder value. We also understand that Ludmila Smolyansky has requested that her name be removed from Mr. Smolyansky’s recent press release.”
