Lifeway Foods Inc. provided additional information regarding the reasons that its board of directors rejected the revised unsolicited proposal made on Nov. 15 by Danone North America PBC to acquire all the shares of Lifeway that it does not already own for $27 per share.

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"The board determined that Danone's $27 per share proposal substantially undervalues the Company. The board is not however opposed to the sale of the company at any price," Lifeway noted in a statement.

"The board has carefully evaluated the company's standalone plan and believes it has strong potential to provide superior value to all shareholders as compared to Danone's revised proposal. The board takes its fiduciary duties seriously and is committed to acting in the best interests of all of the company's shareholders and other stakeholders."

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.
  • 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.

In response to Danone's proposal, Edward and Ludmila Smolyansky, who together exercise voting control with respect to approximately 29.7% of the outstanding shares of common stock of Lifeway Foods, called for Lifeway’s board of directors to take several actions, including immediately establishing an independent special committee to evaluate and negotiate a transaction with Danone or other potential buyers. 

"Rather than negotiate with Danone in response to its generous proposal, Lifeway quickly rejected it outright. This is consistent with the prior statements by CEO Julie Smolyansky and Jason Burdeen, her spouse, who also serves as the CEO’s chief of staff, that they would never allow a sale of Lifeway," Edward and Ludmila alleged in a statement.

In a letter drafted by attorneys, Danone previously stated its offer for Lifeway was "a premium of 59% over the three-month volume weighted average price," and the proposal received "positive market reaction."