An activist shareholder in C&C Group has called for the sale of the drinks company in an open letter, published on Monday.
Engine Capital owns just below a 5% stake in the company, following an investment four years ago.
It has called for changes in light of recent results.
‘Perennial Underperformer’
The shareholder noted that it had invested in the maker of Bulmers and Magners due to its ‘high-quality portfolio of brands.’
It also mentioned the company’s leading position in the Irish and UK markets, and ‘strong free cash flow generation’.
However, it noted that the drinks-maker has been a ‘perennial underperformer’ due to ‘a combination of structural and self-inflicted problems.’
The structural issues include the ‘small size and complexity’ of C&C Group’s drinks portfolio, as there are no similar competitors, making it difficult for investors to value.
In terms of self-inflicted problems, the investor cited a number of issues, culminating in the recent appointment of Ralph Findlay as CEO.
Findlay is the company’s fourth CEO in ‘less than four years’.
Findlay’s appointment came after chief executive Patrick McMahon resigned earlier this month, with immediate effect, after one year in the role.
McMahon resigned on the back of significant accounting adjustments made by the company, dating back to a period when he was chief financial officer of the group.
The business restated three years of earnings and took an underlying charge of €5 million.
‘Attractive Acquisition Target’
Findlay has taken on the chief executive role, in addition to his duties as chair of the board, with C&C Group’s statement noting that he is expected to stay in the CEO role for 12 to 18 months.
Engine Capital noted that Findlay is ‘particularly well-suited to lead this strategic review,’ given his experience and credentials.
However, it called for the company to consider selling the business, as it is an ‘attractive acquisition target’ due to its strong assets, as well as strengthening the board and incentivising management.
In a responding statement, C&C Group noted that it welcomed feedback from all shareholders and has a clear focus on creating shareholder value.
The statement noted, ‘As set out in the recent FY24 year-end results update, the underlying performance of the business has been in line with expectations, and progress has been made in returning capital to shareholders.
‘Operationally, the key priority is to deliver the substantial actions currently being progressed at pace throughout the business, driving forward both Brand and Distribution revenue, improving margin, while returning up to €150 million by the end of FY27.’
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