USA – Lifeway Foods Inc. has provided detailed insights into its decision to reject a revised, unsolicited proposal from Danone North America PBC, offering US$27 per share for the company.
According to a statement by Lifeway’s board of directors, this offer significantly undervalued the company. However, the board emphasized that it is not fundamentally opposed to a potential sale at a higher price.
A report by Lifeway’s board noted that the company’s standalone growth strategy offers superior value for shareholders compared to Danone’s proposal.
Key factors influencing Lifeway’s decision include the company’s consistent financial performance.
According to the report, Lifeway has achieved 20 consecutive fiscal quarters of year-over-year topline growth.
Additionally, the company noted that its total shareholder return over the past five years reached 788%, far outpacing high-growth food and beverage peers as well as the S&P 500.
The board highlighted significant financial milestones, reporting that from 2019 to 2023, annual revenue grew from US$94 million to US$160 million, representing a 71% increase and a cumulative annual growth rate (CAGR) of 14%.
During the same period, gross profit surged by 92%, with an 18% CAGR, and operating income and adjusted EBITDA margins expanded. In 2023, the company reported US$17 million in operating income and US$22 million in adjusted EBITDA.
Looking ahead, Lifeway forecasts its annual adjusted EBITDA will grow from US$22 million in 2023 to between US$45 million and US$50 million by 2027.
Based on this projection, the board argued that Danone’s offer implies a relatively low multiple of approximately 7.5x to 8.5x EBITDA, even before considering potential synergies and additional operational efficiencies.
In response to the proposal, Edward and Ludmila Smolyansky, who control about 29.7% of Lifeway’s outstanding shares, urged the board to form an independent special committee to evaluate and negotiate potential transactions with Danone or other interested buyers.
In a statement, they alleged that Lifeway’s quick rejection of Danone’s offer aligned with previous comments from CEO Julie Smolyansky and Jason Burdeen, who allegedly indicated they would resist any sale.
Meanwhile, Danone’s previous correspondence emphasized that their offer represented a premium of 59% over Lifeway’s three-month volume-weighted average share price, noting positive market reactions to the proposal.