Lifeway Faces Legal Challenge as Danone Alleges Breach of Shareholder Agreement

Danone, a major shareholder in Lifeway since 1999, has expressed mounting frustration following the rejection of two takeover bids for the company. In a letter submitted to the US Securities and Exchange Commission (SEC) on 30 December, Danone’s Deputy CEO Shane Grant outlined the alleged violation, stating, “This issuance required Danone’s consent under the shareholder agreement, and Ms. Smolyansky herself acknowledged that such consent was not granted.” The letter went on to assert that the share award was “null, void, and of no force and effect.”

Failed Takeover Attempts

Danone’s efforts to acquire Lifeway have been met with resistance. In September 2024, the French company proposed a $25-per-share offer, representing a 59% premium over Lifeway’s three-month volume-weighted average price. The bid was swiftly rejected, as was an increased offer of $27 per share in November. Despite this, Lifeway’s board later indicated a potential openness to selling the company under suitable conditions.

“Lifeway belatedly acknowledged that it could not continue to stave off value-maximizing proposals,” Grant wrote. “However, to date, Danone has seen no convincing evidence that Lifeway is seriously considering such options.”

Share Award Controversy

The crux of Danone’s complaint revolves around the board’s decision to grant Smolyansky the disputed shares, a move Grant described as a “value-destroying gifting program” aimed at undermining shareholder interests. Danone’s letter also criticized the board for altering Smolyansky’s severance package and other benefits, which it claims would further erode shareholder value in the event of a sale.

In addition to the share award, Grant raised concerns over Lifeway’s legal expenditures, specifically referencing recent litigation between Smolyansky and her family members, who also hold shares in the company and have supported Danone’s acquisition attempts.

Lifeway’s Defense

A spokesperson for Lifeway dismissed Danone’s accusations, asserting that the shareholder agreement violates Illinois state law. “This agreement has enabled Danone to exploit its position to the detriment of Lifeway,” the spokesperson said. “Lifeway’s recent quarterly performance shattered all historic benchmarks, and the board remains focused on delivering superior value to shareholders and customers.”

Lifeway has pledged to formally respond to Danone’s claims in due course.

Implications for Shareholders

The unfolding legal battle adds uncertainty for Lifeway’s shareholders, with Danone’s aggressive stance highlighting its determination to secure greater control of the company. Meanwhile, Lifeway’s board faces the challenge of defending its decisions amid scrutiny over governance and strategic direction.

As the situation develops, investors and industry analysts will be closely monitoring the outcome of this high-stakes corporate clash.