LONDON (Alliance News) - Stock Spirits Group PLC on Tuesday urged its shareholders to vote against Western Gate Private Investment Ltd's resolutions at its forthcoming annual general meeting, saying they are "disruptive and detrimental".
The drinks distributor has been in a dispute with Western Gate, its largest shareholder with a 9.7% stake, since it requested the removal of Chief Executive Chris Heath earlier this month.
Heath subsequently stepped down and took early retirement on Monday. He has been replaced on an interim basis by Miroslaw Stachowicz, an independent non-executive director on the company's board since November 2015.
Western Gate had called for Heath to be removed from his role after raising a number of concerns, including the loss of market share the company has suffered in Poland.
Last week, Stock Spirits took steps to try and ease some of those concerns by appointing Marek Sypek as the new managing director of its Polish business.
Western Gate is also proposing the appointment of Alberto Da Ponte and Randy Pankevicz as non-executive directors at Stock Spirits' AGM, which will be held on May 23, as well as proposing a full mergers and acquisitions review.
Western Gate is an investment vehicle of the family office of Luis Amaral. Amaral is also the largest shareholder in Eurocash, one of Stock Spirit's largest customers in Poland.
On Tuesday, Stock Spirits said it recommends that shareholders vote against Western Gate's resolutions for a number of reasons.
First, it reiterated that it thinks Amaral's connection with Eurocash represents "an overriding conflict of interest", arguing that he wants to "gain undue influence" at the expense of other shareholders, and that any influence gained over Stock Spirits' pricing strategy would directly benefit Amaral through his Eurocash shareholding.
Second, Stock Spirits criticised Amaral for wanting to "chase market share" without any reference to profitability.
Third, the drinks distributor said it believes the interests of shareholders are best served by a board that is independent and does not include directors which are hand-picked by one shareholder.
Fourth, Stock Spirits argued that a full M&A review at this time would be "a wholly unnecessary" use of company resources so soon after its recent strategic review.
Finally, Stock Spirits said the actions taken by management last year and following the operational review are working, while Poland's performance is improving.
Company Chairman David Maloney referred to Western Gate's resolutions as "disruptive and detrimental".
"We consider these requisitions to be unnecessarily disruptive and detrimental to the majority of shareholders of the company and proposed by a shareholder who has a material conflict of interest by being both the CEO and largest shareholder of our largest customer," he said.
"Whilst there is still much to be done, the actions we are taking are already bearing fruit as last week's positive trading statement highlighted. But we are not prepared to take part in an aggressive price war in order to recover market share at any cost. This would result in a reduced profit for Stock Spirits with the economic benefit transferred across to our customers, including Luis Amaral's Eurocash business," Maloney added.
Last week, Stock Spirits said revenue in the first quarter of 2016 grew to EUR55.3 million from EUR42.7 million a year earlier, up 29%. The company said it made market share gains in the Czech Republic, though its market share in Poland sank to 29.5% from 36.9%.
Stock Spirits said, however, that it returned to profit in the first quarter in Poland following a loss a year earlier and continues to hold leading positions in the flavoured vodka category.
Shares in Stock Spirits were trading up 0.3% at 154.50 pence on Tuesday morning.
By Karolina Kaminska; karolinakaminska@alliancenews.com @KarolinaAllNews
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