MORTON GROVE, Ill. - Lifeway Foods, Inc. (NASDAQ: LWAY), a prominent U.S. supplier of kefir and fermented probiotic products, has turned down an unsolicited acquisition proposal from Danone (EPA:DANO) North America PBC. The offer, dated September 23, 2024, suggested buying out Lifeway shares not already owned by Danone for $25.00 each.
Lifeway's Board of Directors, after consulting with independent financial and legal advisors, concluded that the offer significantly undervalues the company. They believe it does not serve the best interests of Lifeway, its shareholders, or other stakeholders. As a countermeasure, the Board has implemented a shareholder rights plan, effective immediately, to ensure fair treatment of investors and to prevent Danone from potentially gaining control without offering a premium or allowing the Board adequate time to evaluate and act in the shareholders' best interests.
The rights plan will issue one preferred share purchase right for each outstanding share of common stock to shareholders on record as of November 18, 2024. These rights will initially be non-exercisable and will accompany Lifeway's common stock shares. The plan activates if any entity, person, or group acquires a beneficial ownership of 20% or more of Lifeway's common stock without Board approval or if a current owner of 20% or more of the stock acquires additional shares.
In the event the rights become exercisable, each right will allow the holder to purchase additional common stock at a market value double the exercise price, with the exception of the triggering entity, whose rights will become void.
The rights plan does not prevent any acquisition offers and does not restrict the Board from considering any fair proposals in the best interests of the shareholders. The rights are set to expire on November 4, 2025, unless redeemed, terminated, or exchanged earlier according to the plan's terms.
Lifeway is determined to continue its strategic plan, focusing on expanding kefir's household presence and venturing into new categories. The company aims to build upon its recent financial success and enhance shareholder value. The Board and management team are dedicated to acting in the best interests of all shareholders.
Further details regarding the rights plan will be disclosed in a Current Report on Form 8-K to be filed with the Securities and Exchange Commission. Evercore is acting as Lifeway's financial advisor, with Sidley Austin LLP as legal counsel.
This article is based on a press release statement from Lifeway Foods, Inc.
"In other recent news, Lifeway Foods has seen impressive growth in its Q2 earnings. The company reported net sales reaching a record $49.2 million, a significant 25.3% increase compared to the same period last year. This surge was largely driven by Lifeway's flagship product, the drinkable kefir. The company also reported an increase in net income to $3.8 million, with earnings per share standing at $0.26 for basic shares and $0.25 for diluted common shares. Lifeway Foods' gross profit margin also saw improvement, rising to 27%.
In addition to these financial highlights, Lifeway Foods received an unsolicited purchase offer from Danone North America PBC, proposing to acquire all outstanding Lifeway shares not already owned by Danone for $25.00 each in cash. Danone currently holds about 23.4% of Lifeway’s common stock. The offer is non-binding and Lifeway's Board of Directors is set to review the proposal.
Recent developments also include an expansion in distribution and investment in marketing, primarily focusing on their core product. Lifeway Foods has secured new placements in retail stores such as Stop & Shop, and increased its store count with Target (NYSE:TGT). The company is expected to provide a progress update in the third quarter earnings call later this year."
InvestingPro Insights
Lifeway Foods' (NASDAQ: LWAY) rejection of Danone's acquisition offer aligns with several positive indicators from InvestingPro data. The company's strong financial position is evident from its market cap of $366.07 million and impressive revenue growth of 16.99% over the last twelve months as of Q2 2024. This growth trajectory supports the Board's assertion that the $25.00 per share offer undervalues the company.
InvestingPro Tips highlight Lifeway's solid financial health, which may have influenced the Board's decision. The company "holds more cash than debt on its balance sheet" and "liquid assets exceed short term obligations," suggesting a strong foundation for independent growth. Additionally, Lifeway is "profitable over the last twelve months," with analysts predicting continued profitability this year.
The company's recent performance is particularly noteworthy, with a "strong return over the last three months" of 127.9% and a one-year price total return of 132.61%. These figures underscore Lifeway's market momentum and potential for future growth, potentially justifying the Board's confidence in rejecting the acquisition offer.
Investors seeking more comprehensive analysis can access additional InvestingPro Tips, with 12 tips available for Lifeway Foods. These insights could provide valuable context for understanding the company's strategic decisions and future prospects.
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