Board is not opposed to sale, but says $27.00 per share “substantially undervalues” company.
December 2, 2024
Lifeway Foods Inc., the leading U.S. supplier of kefir and fermented probiotic products to support the microbiome, has offered additional reasons it rejected a revised unsolicited proposal by Danone North America to acquire all the shares of Lifeway that it does not already own for $27.00 per share.
Lifeway’s board of directors determined that Danone's $27.00 per share proposal “substantially undervalues” the company. However, the board said it is not opposed to the sale of the company at any price.
The board has carefully evaluated the Lifeway's standalone plan and believes it has strong potential to provide superior value to all shareholders as compared to Danone's revised proposal.
Lifeway Foods is the number one kefir brand and is experiencing double-digit growth, which is eclipsing much of the rest of the dairy and food industry. As Lifeway's historical financial results indicate, the company has sustained momentum with runway for significant long-term growth and margin expansion. This growth is being driven by an increasing recognition among consumers of the importance of the gut microbiome to overall health and the benefits of the naturally available high-quality protein and probiotics contained in kefir. A growing body of scientific research supports these benefits and speaks to the unique value proposition of Lifeway.
In reaching its determination regarding Danone's revised proposal, the board also took into account the following:
Lifeway has achieved 20 consecutive fiscal quarters of year-over-year topline growth.
Over the past five years, Lifeway achieved a total shareholder return of 788% (as measured through September 23, 2024, the last full trading day before Danone's initial unsolicited proposal was publicly disclosed), far outperforming other high growth food and beverage peers as well as the S&P 500.
From 2019 to 2023, the company's annual revenue has grown from $94 million to $160 million, a 71% increase and a 14% cumulative annual growth rate (CAGR).
Over that same five-year period, gross profit increased 92%, representing an 18% CAGR, with continued Operating Income and Adjusted EBITDA margin expansion over the same period achieving $17 million in Operating Income and $22 million in Adjusted EBITDA in 2023.
The board and management believe that Lifeway has reached an inflection point, with strong momentum in core kefir products, new product adjacencies and ongoing operational efficiency programs, which have rapidly improved profitability and which the company expects to continue to rapidly improve profitability.
Lifeway forecasts annual Adjusted EBITDA to grow from $22 million in 2023 to between $45 million and $50 million in 2027.
Based on the expected 2027 EBITDA range, the Danone proposal of $27 per share implies a very low multiple of ~7.5x – 8.5x EBITDA, even prior to accounting for substantial synergies and additional operational efficiencies that Danone (or another strategic acquirer) could realize.
“Lifeway's board and management are committed to ensuring that all shareholders are able to realize the full potential value of their investment,” the company said.
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