Bubs Australia has come out swinging against the motion led by ousted chief executive Kristy Carr to spill its board, arguing vested interests are at play and a change of leadership will have a serious destabilising effect on the company.
The infant formula maker confirmed on Thursday that it would hold an extraordinary general meeting on July 27 for investors to vote on motions brought by Carr and other concerned shareholders to remove the current leadership and install a new board and chief executive in Peter Nathan, formerly of A2 Milk.
Carr, who founded Bubs Australia two decades ago, is spearheading a movement to spill the current board after she and longtime chairman Dennis Lin were abruptly forced out of the company by the other board directors.
But in a letter to shareholders about the meeting released to the ASX on Thursday, the current management defended itself after terminating Carr and Lin, and claimed that some investors looking to spill the board had vested interests in continuing to pursue an unsuccessful strategy for the company in China.
Bubs management pointed to the sustained decline in share price of the company, with the stock dropping by more than 84 per cent between May 2020 and May 2023, and said it made changes to board leadership in light of “significant deterioration in Bubs’ recent financial performance, undisciplined expenditure and the long-term decline in shareholder value presided over by the ex-chair and ex-CEO including failing to comply with reasonable Board directions”.
The company also said the proposed new leadership was not appropriate for the business, pointing to shareholder class action activity at Peter Nathan’s former employer, A2 Milk.
“Mr Nathan previously worked for A2 Milk, which is currently a defendant in two shareholder class actions which relate to continuous disclosure obligations and making allegedly false and misleading statements in connection with the deterioration in A2’s sales.
“The board believes the ongoing class actions present significant reputational risks for Bubs at a critical time when it is seeking FDA approvals in the US and reviewing its China strategy.”
Central to the tensions at Bubs has been the company’s strategy in China and the sales performance of exclusive distribution deals that the company had inked with seller AZ Global.
Two entities associated with AZ Global, Willis Trading and Alice Trading, have backed the motion to spill the board.
“One of the requisitioners is Willis Trading, which owes Bubs a debt of $2.6 million. In addition, Alice Trading, which is owned by the same company as Willis Trading, owes Bubs a debt of $2.9 million. These entities have failed to repay the debts despite repeated demands from Bubs,” the company told shareholders.
“Some of the requisitioners have a vested interest in the failed China strategy of Bubs and propose to replace the current independent directors with directors who have pursued similar strategies at other organisations.”
But Carr and the fellow shareholders seeking new leadership accuse the current board of failing to outline a business strategy.
“The current board summarily sacked top executives and lost the support of Bubs’ founder, taking control of the board and management without a transition plan for a new CEO, CFO or business strategy,” those pushing for the spill told investors.
The group of concerned investors led by Carr, badged “Save Our Bubs”, includes Chemist Warehouse chair Jack Gance.
Two weeks after being installed as chair, current Bubs chairman Katrina Rathie announced a strategic review of the company’s operations that will be completed by July.
The review is led by agribusiness dealmaker David Williams, restructuring firm McGrathNicol, and Jackie Lin of C2 Capital, an Alibaba-backed private equity firm that became a major shareholder in Bubs after purchasing a 15 per cent stake and installing its managing partner Steve Lin as a board member.
Bubs shares were 5.2 per cent lower to 18 cents just before 1.30pm.
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Source: Thanks smh.com