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Michael McCain, president of Maple Leaf FoodsRyan Remiorz/The Canadian Press

Maple Leaf Foods chief executive officer Michael McCain won a reputation as a great communicator when the food company was forced into a massive recall in 2008 after tainted meat from a Toronto plant was linked to more than 20 deaths.

He stepped in front of the television cameras and apologized to customers, against the advice of his lawyers, and was praised for his forthright handling of the crisis.

He'll need every bit of that communications skill now as he faces a battle over the future of Maple Leaf that could challenge his family's long hold on the company and even put his job as CEO at risk. This time, his message will be aimed not at customers, but shareholders.

Mr. McCain, 51, faced his first such test Wednesday when, according to sources, he met in his Toronto office with Maple Leaf food's newest and potentially most disruptive shareholder, Greg Boland of hedge fund West Face Capital.

After spending $113-million to purchase a 10-per-cent stake in Maple Leaf on Monday, sources said Mr. Boland used the meeting Wednesday to urge Mr. McCain to explain when his long-term strategy to overhaul the company would deliver the turnaround he has been promising investors for years.

Two people familiar with the situation said the meeting was "cordial." Mr. Boland asked Mr. McCain for "specifics" on his plans to improve the company's financial results, one of the people said. "Michael had some convincing to do."

Representatives of both Maple Leaf and West Face declined to comment on any discussions.

Recent changes at Maple Leaf mean that for the first time since the McCain family bought its stake in the company 15 years ago, shareholders outside the family's inner circle will have a significant say in the future of the company.

The door to change began to swing open on June 30 when the Ontario Teachers' Pension Plan, a big investor that had backed the McCains since the 1990s, let lapse an agreement with the family on decisions about how to run Maple Leaf. Frustrated with Maple Leaf's results, Teachers went so far as to seek buyers for its entire 36-per-cent stake in the company in recent months.

Faced with low bids, the pension fund elected to sell a smaller stake to West Face. The hedge fund still paid about 8 per cent below the market price for the shares, and has already made money. The stock is up 6.7 per cent since the transaction was disclosed Tuesday.

Now, control of Maple Leaf is up for grabs. Roughly one-third of the votes to control the company rest with the McCain family. West Face and Teachers have a little more than a third together. If the two groups square off, the winner will be the side that can win the backing of the rest of Maple Leaf's shareholders.

To succeed, Mr. McCain must convince investors in Maple Leaf that his strategy is about to pay off and will soon reverse years of lagging performance by the company's stock.

Mr. McCain has sought patience from investors, saying that a rising Canadian dollar and the tainted-meat crisis set the company back. The pitch now is that the company is poised for "breakout results" driven by "investing in assets, systems and growth," according to a recent investor presentation prepared by Maple Leaf.

It's that investment program that is likely to be one of potential points of conflict. Maple Leaf's strategy of investing heavily in its meat-production business gets little credit from the market, which places most of its value on the company's bakeries.

Mr. McCain has bet heavily on meat, telling investors in April at the company's annual meeting that margins in that business are too low and Maple Leaf must make what may be the largest capital investments in the company's history in a quest to improve efficiency.

However, Maple Leaf has had trouble delivering returns on such investments, said Ian Cooke, a portfolio manager at QV Investors Inc., a large Maple Leaf shareholder. He said the company should consider scrapping plans for capital spending.

"The business has been well managed on a product side, but not on a return-on-capital side," Mr. Cooke said.

If West Face, Teachers and the McCain family can't agree on strategy, Mr. McCain's future as chief executive officer could be at risk. Two people close to Maple Leaf's board, speaking on condition of anonymity, acknowledged that Mr. McCain's position is delicate.

While West Face has often been a patient investor that works with management, the firm has also shown it can be aggressive. In 2008, the firm sought to oust the board of ACE Aviation Holdings Inc. after a disagreement on the future of the company.

Mr. Cooke said that, in his view, Mr. McCain is a strong leader, but should scale back spending and shore up the balance sheet. Mr. McCain "can do anything he sets his mind to," Mr. Cooke said, "but he needs to buy into it."







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