MGP Ingredients cuts annual meeting short following shareholder dissent
ATCHISON, KAS. — MGP Ingredients, Inc. adjourned its 2013 annual meeting of shareholders scheduled for May 23 due to a lack of quorum of preferred stock shareholders. There was a quorum of common stock shareholders. A quorum is the minimal number of officers and members of a committee or organization who must be present for valid transaction of business.
According to a May 24 filing with the Securities and Exchange Commission, two members of the board, Karen Seaberg and Cloud Cray Jr., refused to attend at the meeting, citing a “growing concern with the lack of profitable growth, deterioration in the corporate culture, efforts to sell certain parts of the company’s business, efforts to amend the bylaws that would limit accountability to shareholders and increase the power of the chief executive officer, and the level of compensation paid to the chairman of the board of directors and the c.e.o. of the company.”
As a result, Ms. Seaberg and Mr. Cray (along with Laidacker M. Seaberg, Cray Family Management L.L.C. and Cray MGP Holdings LP), said in the filing they are actively seeking to change the board, as well as influence the board and officers “to improve business and financial performance, ensure accountability to shareholders and restore a corporate culture that is positive, is empowering and reinforces the company’s goals.”
Specifically, Ms. Seaberg and Mr. Cray said they are seeking the removal of Tim Newkirk as c.e.o. and requesting his resignation as a director, as well as the resignation of any other directors of the board who are not supportive of the their goals and related actions.
Other changes sought by Ms. Seaberg and Mr. Cray include an amendment that would allow large stockholders to call a special meeting, an amendment that would eliminate the staggered board and provide for the annual election of all directors and, once approved, effect the destaggering immediately allowing the prompt removal of all directors who do not support the proposed changes.
Under the MGP articles of incorporation, preferred shareholders are entitled to elect five of the nine directors (B directors) with the common shareholders electing the balance (A directors). A majority of the preferred stock is controlled by the Cray family (including Ms. Seaberg, his daughter). In effect, this ownership gives the family the ability to elect a majority of the MGP Ingredient directors, over time.
Of the nine directors, only two Group B and one Group A directors were up for election at the 2013 annual meeting – Mr. Cray and John E. Byom, the former chief financial officer of International Multifoods Corp. The Group A director nominated in the proxy was John R. Spiers, who serves as lead director. All three currently serve on the MGPI board and were nominated for re-election.
Other Group A directors include Linda E. Miller (term expiring 2015), Daryl R. Schaller (term expiring 2015) and Gary Gradinger (2014). The remaining Group B directors are Michael Braude (2015), Mr. Newkirk (2014) and Ms. Seaberg (2014).
When the annual meeting does reconvene, Ms. Seaberg and Mr. Cray said they intend to vote their shares of preferred stock in favor of Mr. Cray and another Group B nominee they will nominate, and will not vote their shares in favor of John Byom, who is the Group B nominee nominated by the company’s board of directors. Ms. Seaberg and Mr. Cray also said they intend to vote their shares of common stock, and to solicit proxies from other holders of common stock, to vote in favor of a nominee they will nominate at the 2013 annual meeting, and will not vote in favor of John Spiers, who is the Group A nominee nominated by the company’s board of directors.
A trust controlled by Mr. Cray owns 2.6 million shares of MGP Ingredients common stock, or just under 15% of the outstanding common stock.
MGPI said its board of directors is assessing the decision by the preferred stockholders to refuse to be present at the annual meeting, which will now be scheduled for a later date.
“The company’s executive management is implementing a business strategy of product and service leadership within a narrow segment of customers in the consumer packaged goods industry,” MGPI said. “This strategy has involved repositioning the company’s assets and product offerings into higher margin products and away from raw material price volatility. Specifically, the company’s alcohol resources are focused on distilled beverages and higher value custom formulations for industrial applications. The company’s food ingredient resources are focused on new product innovations, including taste, texture, function and nutritional health and wellness.”