An employee makes sure the proper amount of wieners is in each package before it is sealed. Tour of the Maple Leaf Foods Hamilton wiener plant on February 17, 2011.Peter Power/The Globe and Mail
Michael McCain has taken up his father's mantle at Maple Leaf Foods Inc. and solidified his grip on the company by becoming its largest shareholder.
Mr. McCain, the company's chief executive officer, will own 32 per cent of Maple Leaf's shares under a reorganization of a McCain family company. That company, McCain Capital Corp., was headed by Mr. McCain's father, Wallace, and it has held roughly one-third of Maple Leaf's shares since 1995 when the McCains launched a takeover backed by the Ontario Teachers' Pension Plan Board.
By personally taking control of the family's shares, Mr. McCain will be in a more powerful position to directly take on shareholders who have questioned his management of the company. He has become a lightning rod for some investors who have expressed frustration at Maple Leaf's lagging share price and question Mr. McCain's $1.3-billion plan to modernize the company's operations.
Mr. McCain has argued the company was shielded by the low Canadian dollar for years and became unproductive compared to larger food players in the United States. With the dollar stronger, and imported products cheaper, Maple Leaf has lost ground and must restructure.
The Maple Leaf takeover came shortly after Wallace left McCain Foods Ltd. because of a feud with his brother Harrison, who died in 2004. Mr. McCain and his brother Scott, who is also an executive at Maple Leaf, have long owned an interest in McCain Capital along with Wallace and other family members.
Wallace, Maple Leaf's long-time chairman, passed away in May and on Thursday McCain Capital announced that its shareholders agreed to transfer all of its Maple Leaf holdings to Mr. McCain "in connection with various estate planning initiatives undertaken in connection with the wishes and directions" of Wallace. Details of the arrangement were not provided.
Mr. McCain will now hold nearly 44-million Maple Leaf shares and will be entitled to nominate four of the company's 13 directors at the next annual meeting.
"I'm very pleased with this increased ownership position," Mr. McCain told analysts on a conference call Thursday to announce the company's second-quarter results. "It reflects my very strong belief in the company, the earnings momentum that we're building and the potential for significant near and long-term value creation for all share owners. I certainly, resolutely, align my interests with other shareholders and expect to see this value creation plan fully realized."
The dispute came to a head last year when Teachers terminated a shareholder agreement with McCain Capital and sold its roughly 35-per-cent stake in the company. Some of the shares were acquired by activist shareholders West Face Capital which began agitating for changes at Maple Leaf. A truce came in February when West Face, which owns about 11 per cent of Maple Leaf, was given a seat on the board.
On Thursday Mr. McCain said the reorganization efforts are beginning to pay off. The company reported a $26.4-million second-quarter profit, compared to $4.9-million in the same quarter last year. Revenue dropped to $1.24-billion from $1.27-billion, mainly because some businesses were sold.
Mr. McCain told analysts the company did well on almost every front during the quarter and managed to push through price increases without losing a significant amount of sales. The company's $125-million state-of-the-art bakery in Hamilton also opened on time this month and will be fully operational over the next 18 months. It will gradually replace three existing plants.
"In certainly challenging food-inflation market conditions our strategic agenda is progressing very well," Mr. McCain said. "We also feel we're achieving good momentum in the marketplace on the back of innovation and consumer activity."
Paul Waldie