Primo Water Corp. (NYSE: PRMW), a publicly traded company headquartered in Tampa that specializes in bottled water products and services, has settled a lawsuit filed in Ontario — the company’s shares are also traded on the Toronto Stock Exchange — by one of its investors, Los Angeles-based Legion Partners Asset Management LLC.
The dispute was sparked by Primo’s decision to block the nominations of Henrik Jelert and Lori Marcus, two of the four people Legion had nominated for seats on the company’s board of directors, prior to the firm’s annual general meeting, which has since been pushed back to May 31.
In a letter to shareholders, Primo said Jelert and 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).”
Primo also said Legion didn’t allow its preferred candidates to be interviewed by the company’s leadership team, and it said Jelert and Marcus refused direct invitations to a meeting.
According to a statement about the settlement issued by Primo, Jelert and Marcus will be allowed to stand for election to Primo’s board of directors, along with Legion’s other two nominees, Tim Hasara and Derek Lewis.
“The board took this compromise action to avoid the ongoing and significant expense and distraction associated with litigation and determined that resolving the outstanding litigation was in the best interests of the company and its shareowners,” the statement reads.
Legion responded with a statement of its own, saying, "This outcome is confirmation of the position we have always taken: The actions by Primo’s board — first attempting to invalidate our entire campaign and subsequently two of our nominees — were nothing more than a tactic to subvert the rights of shareowners. Primo’s assertion that it has abandoned its efforts to block shareowners from voting on the Legion Partners nominees due to 'expense and distraction' associated with the litigation is not credible."
Legion's statement goes on to criticize Primo's board of directors for setting "a troubling precedent."
It reads: "Companies should not be allowed to weaponize their bylaws in order to reject director nominations with no basis, and then force shareowners to bring costly litigation simply to have their nominees voted on. This is the definition of using corporate resources to the detriment of shareowners. In our view, the fact that the board was willing to engage in this behavior, while wasting shareowner capital, underscores the need for significant change on the Primo board."