The investor recently blasted Freshpet over governance changes that could impact the investor’s ability to secure board seats, and has now turned that complaint into a legal undertaking, filing a lawsuit in the Court of Chancery of the State of Delaware against Freshpet and the company’s board of directors.
The New York-based investor is the largest shareholder in Freshpet with a 9.3% stake and has expressed dissatisfaction with the pet-food group’s performance.
Freshpet recently named director Walt George as its new board chair, the latest in a series of executive moves at the business. George is to be appointed chair after the annual meeting.
Additionally, the company appointed former Conagra chief supply chain officer David Biegger as a board director.
Jana, which first invested in Freshpet last September, previously announced it would be nominating four candidates to Freshpet’s board at the annual meeting, with former Kraft Foods CFO Timothy McLevish and Kurt Schmidt, the ex-CEO of US pet-food company Blue Buffalo, being two of the four Jana picks.
Jana said in a statement accompanying its legal filing that it seeks a declaratory judgment and a determination that the board’s “recent actions to entrench itself and refusal to reverse them constitute breaches of fiduciary duties and an order requiring that the number of directors up for election at the company’s 2023 annual meeting of stockholders returns to its original size, such that four director seats, rather than three, stand for election at the meeting”.
Jana’s filing contends that the board’s actions constitute a breach of its fiduciary duties and that it should have the opportunity to nominate four directors at the meeting.
The investor is also unhappy that Freshpet has brought forward the date for the annual meeting, usually in mid-autumn, to 25 June, a move it suggests is “a clear entrenchment tactic by the board to avoid accountability to Freshpet’s shareholders.”
The investor holds that the board’s actions are a blatant misuse of corporate machinery that obstructs the legitimate efforts of shareholders to exercise their rights.
“The Freshpet board’s recent entrenchment actions constitute a clear breach of its fiduciary duties, leaving us with no choice but to seek expedited relief in Delaware Court so that a truly fair and democratic election of directors is allowed to proceed,” Barry Rosenstein, a managing partner at JANA, remarked.
Furthermore, the activist investor accused the board of repeatedly failing to properly supervise management as performance worsened and liquidity deteriorated – “while allowing more than half of Freshpet’s independent directors to pursue outside interests with corporate resources and key members of leadership.”
However, according to a statement sent to the Securities and Exchange Commission on 2nd June, Freshpet has extended an olive branch to the investor.
In the statement, the pet food company offered to interview Jana’s independent director picks in light of the recent departure of director David Basto, as part of its “continuing commitment to reach a resolution with Jana Partners that is in the best interest of all stockholders”.
“This current offer follows the company’s extensive engagement with Jana over nearly nine months and efforts to reach a constructive resolution to avoid a distracting proxy fight,” the statement said:
In an earlier statement, Freshpet had maintained that its actions had the interests of the shareholders in mind.
“Contrary to your assertions, the board has acted in the best interests of all stockholders, in accordance with the directors’ fiduciary duties, and in compliance with the requirements of the company’s sixth amended and restated certificate of incorporation,” read the statement.