C&C activist shareholder calls for sale of business

An activist shareholder in drinks company, C&C, has published an open letter to the company’s board urging it to explore strategic alternatives for the business.

New York based Engine Capital, which owns just under 5% of the firm that owns Bulmers and Magners cider, said it had invested in C&C more than four years ago.

It said it had done so due to its “high-quality portfolio of brands, leading distribution position in the UK and Ireland beverage markets, strong free cash flow generation and the ample opportunities for the Board to significantly increase shareholder value.”

But it said that despite these favourable attributes, C&C has been a “perennial underperformer”.

It claimed the company is “deeply misunderstood and undervalued by the market because of a combination of structural and self-inflicted problems.”

Engine Capital said C&C’s valuation is entirely disconnected from the strategic value of its assets.

“Given these dynamics, we believe the best path forward is for the Board to explore strategic alternatives for the Company,” it wrote.

“C&C remains a unique and strategic asset, which is why we are confident that buyers would pay a price that is far superior to its standalone value, especially considering the time value of money and execution risks (including CEO succession risks.”

Earlier this month, C&C chief executive Patrick McMahon resigned after the business restated three years of earnings and took an underlying charge of €5m.

Mr McMahon had been in the CEO role for a year.

Ralph Findlay, the chairman of C&C, was appointed chief executive “to ensure continuity of executive leadership” the company said at the time and it was reported that he would remain in the role for up to a year and a half.

Engine Capital said C&C has now had four CEOs in less than four years with the prospect of a fifth in 12 to 18 months, “further compounding uncertainty and execution risks.”

Responding to the shareholder correspondence, C&C said it notes the open letter and its board welcomes feedback from all shareholders and has a clear focus on creating shareholder value.

“As set out in the recent FY24 year-end results update, the underlying performance of the business has been in line with expectations, and progress has been made in returning capital to shareholders,” it said.

“Operationally, the key priority is to deliver the substantial actions currently being progressed at pace throughout the business, driving forward both Brand and Distribution revenue, improving margin, while returning up to €150m by the end of FY27.”