In proxy materials filed with the U.S. Securities and Exchange Commission prior to its May 3 annual meeting, Primo Water Corp. (NYSE: PRMW), a publicly traded company headquartered in Tampa, has lashed out at Los Angeles-based Legion Partners Asset Management LLC, an investment firm that owns a small portion of Primo’s outstanding shares, in response to Legion’s criticism of Primo’s financial performance.
The materials include a letter to shareholders that encourages them to vote for Primo’s preferred candidates “who are standing for election to the board of directors.” The slate of 10 candidates does not include any of the names put forward by Legion in March.
“Our candidates for the board are experienced, dedicated and diverse,” the letter reads. “They have been founders, executives and board members at some of the largest and most respected beverage and route-based companies in the world, including PepsiCo, Coca-Cola Enterprises, Anheuser-Busch, Aramark and Blue Rhino. They also bring important functional expertise in areas that are integral to our business such as executive leadership, operations, finance, digital marketing, capital markets and human resources.”
Primo’s letter goes on to say that two of Legion’s board director nominees, Henrik Jelert and Lori Marcus, “failed to disclose important and required information to the company (one neglected to disclose that he was criminally tried for allegedly bribing a government official and the other did not disclose a pending case against her for fraud).” Furthermore, Primo blames Legion for allegedly not allowing its preferred candidates to be interviewed by the company’s leadership team. Primo also says Jelert and Marcus refused direct invitations to a meeting.
“Legion's motives remain unclear,” the letter reads. “Legion began buying our stock less than six months ago and currently owns approximately 1.5% of the company's total outstanding shares. Since then, Legion has sought very limited interaction with us and has never had meaningful conversations with our board or management team. To our disappointment, Legion has refused to constructively engage with us and has provided no recommendations on how to improve Primo Water.”
The letter continues, “As best we can tell, Legion is far more interested in grabbing headlines than engaging in substantive discussions about business improvement initiatives. If that changes, we welcome a conversation and any ideas Legion may have to support our success.”
However, in a letter sent to shareholders on April 4, Legion fires back at Primo’s response, saying it will challenge in court the company’s decision to block the nominations of Jelert and Marcus.
“The board has brazenly determined to not recognize these valid nominations, forcing Legion Partners to bring an application before the Ontario Superior Court of Justice in Canada and seek other legal remedies just to provide shareowners the opportunity to vote on their candidacies,” Legion’s letter reads. “We fully expect to be successful in one or more of these proceedings.”
In the meantime, Legion says it will continue to push for shareholders to vote for its other two preferred candidates, Derek Lewis and Tim Hasara, whose nominations have not been blocked. Calling Primo’s current board “broken” and “in need of refreshment,” Legion says shareholders should “send a clear and unequivocal message to the board that these entrenchment tactics are not acceptable, by not voting for the company’s long-tenured directors — Jeremy Fowden, Gregory Monahan, Billy Prim and Eric Rosenfeld.”
Via brands including AquaTerra, PureFlo and Mountain Valley Spring Water, Primo is a leading provider of water and related products — what it calls hydration solutions — throughout North America, Europe and Israel, manufacturing water dispensers and delivering bottled water to millions of homes and businesses. According to its website, Primo sells more than one billion gallons of water every year. It reported gross revenue of $2.07 billion in 2022, up from $1.95 billion in 2021 — an increase of more than 6%, though it posted a loss of $3.2 million.