Commenting on the pending vote on whether or not Darby should continue as CEO, amid opposition from US share funds, Wilkinson said Darby “was never dealt a fair hand when he took over”.
Just after Premier Foods acquired RHM in 2006, its shares were valued at £4.80 each. As of 10 July, they had fallen to 44.75p each.
“My view is that he should go quietly, and give someone else a crack. He has had five years and more of the same looks uninspired. It is for him to fall on his sword not be kicked out by the board or shareholders. I actually think he will get re-elected, but, as with the McCormick deal, regret his decision.”
He praised Darby for stabilising the business, but said it had “descended into zombieland”. “Unable to acquire, too much debt, mature categories … a company going nowhere.”
US spice-maker McCormick Foods’ bid to acquire Premier Foods in 2016 should have been seen as a “get out of jail free card”, said Wilkinson, but it was rejected by the board.
“The Premier board just played this wrong. They should have moved heaven and earth to convince McCormick to do the deal. Synergies, critical mass, pension funds appeased … move on.”
He said Darby might not have favoured the ultimate decision, but he could have made more effort to persuade the board.
“The Premier defence is pathetic. Quoting the pension scheme deficit reductions as a success is ridiculous as the funds make their own investment decisions. Given the inherent cash generation, the debt reduction is hardly one to celebrate.”
Wilkinson’s comments come as it emerged that Oasis Management Company had increased its stake in Premier Foods to 17.3%. US fund Paulson & Co, which is also attempting to usurp Darby, has a 6% share.
In a statement on its microsite, Oasis stated: “Gavin Darby has overseen five years of failure, which has led to considerable destruction of shareholder value. The equity market has long lost faith in his leadership and, in our view, his self-interest and self-preservation, which we will no doubt see much of over the coming weeks, have driven a culture which does not respect the interests of shareholders.
“Gavin Darby, who frustratingly has driven Premier Foods into its current zombie-like state, has no credible strategy to return Premier Foods to growth and, as the largest independent shareholder, we have completely lost faith in him. It is time for change. Long-suffering shareholders need new energy, leadership and fresh ideas. The status quo is no longer tenable.”
Oasis has proposed that Premier Foods’ chief financial officer Alastair Murray should become interim CEO until a permanent replacement for Darby can be found.
Responding last week to Oasis’ attack on Darby last week, Ian MacLaurin (Baron MacLaurin of Knebworth), formerly chairman of Tesco and Vodafone, said: “I have known Gavin Darby for 25 years, firstly as his customer when he was at Coca-Cola Europe and I was chairman of Tesco, and then as his chairman when he was at Vodafone. I have always found him to be an excellent manager, good with people, and a very strong strategic thinker.
“The grocery market has been going through turmoil in recent years. Against this backdrop, what Gavin has achieved at Premier Foods since he became CEO has been hugely impressive. He has significantly strengthened the company's finances and transformed its brands. For Premier Foods to change CEO at this stage would be a mistake.”
Former Waitrose managing director Mark Price (Baron Price), said: "Premier Foods had serious structural issues when Gavin became CEO. Few CEOs would have taken them on. Since then, the company has restructured its debt, its pension deficit, sold assets and realised value and traded through a really demanding market. If these activist investors succeed in removing him, they risk destroying significant value, rather than creating it.”
Nissin Foods Holdings, which has a 19.8% stake in Premier Foods, threw its weight behind Darby yesterday (10 July). Premier Foods itself made clear it also supported Darby. Premier Foods chairman Keith Hamill said at the beginning of this month: “The board believes that Gavin Darby is running the company well. In contrast, the Oasis proposal offers no constructive solution to the challenges being addressed and involves the risk of creating instability at a time when continuity is important in completing the work being done. The board unanimously recommends that shareholders vote in favour of Gavin Darby's re-election as CEO at the AGM on the 18 July 2018.”
In May, Premier Foods posted its strongest sales growth in five years in its results for the year to 31 March 2018.
- For more on Gavin Darby's leadership of Premier Foods, read Food Manufacture’s July issue, p10.