This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.
News
Western Gate hits out at Stock Spirits over special dividend
Shareholder Western Gate has voiced further concerns about the governance of Stock Spirits after the vodka producer dismissed its proposal to pay investors a special dividend.
Stock Spirits owns numerous vodka brands, including Stock Prestige and Božkov
Western Gate owns a 10% share in Stock Spirits making it the company’s second-largest shareholder. In December last year, Western Gate called on Stock Spirits to pay a special dividend, claiming it was “unacceptable” that “shareholders are not receiving any value” from their backing.
Following the announcement of Stock Spirits’ annual general meeting (AGM) 2020, Western Gate accused the Stock Spirits board of “arrogantly” claiming that even if shareholders vote for a special dividend, it would disregard the decision.
In the notice of its 2020 AGM, Stock Spirits proposed to shareholders a special dividend of €0.1219 per ordinary share, to be paid on 20 March 2020 if passed.
It added that under the ‘company’s articles of association’, any dividend declared by shareholders must not exceed the amount recommended by the directors. “The directors do not recommend the proposed dividend,” the statement continued, and added: “Therefore shareholders should note that even if the resolution is passed, it would have no legal effect (because it is inconsistent with the articles), and the company would not be required to pay the dividend.”
Francisco Santos, director, Western Gate, said: “This is a red flag to all investors. The response to our reasonable call for a special dividend is unacceptable.
“In our view, the board of any company – private or public – is obligated to at least consider the recommendation of the shareholders and not to state openly that no matter what the recommendation is, it will not be followed by the board.
“The board is obligated to represent the interest of the company and its shareholders as well as communicate duly with the latter. Those are some basic corporate governance standards, which we would expect to be complied with.
“We call on fellow shareholders to vote for ‘resolution 20’ at the upcoming AGM and for the company to see a large vote in favour as a mandate for a review of the capital allocation policy.”
Special dividend ‘significant constraint’
Stock Spirits responded to Western Gate’s concerns and argued that a special dividend now would be a “significant constraint” on the company’s M&A plans.
A spokesperson for Stock Spirits commented: “We have a strategy of both organic and M&A-driven growth which, as our recent full year results show, is driving a strong financial and operational performance and is enabling payment of consistently increasing dividends.
“We continue to assess a range of more meaningful and value-creating M&A opportunities in both existing and new categories and markets but, as we have consistently said, if such opportunities are not realised then we will of course consider making additional shareholder distributions.
“It is our view that payment of a special dividend now would act as a significant constraint on our ability to execute on our M&A and organic growth strategy, which we firmly believe is the best way of improving returns for our shareholders.
“Furthermore, as set out in our articles of association, in common with many UK listed companies, a resolution to pay a special dividend above the one recommended by the board has to be proposed and passed as a special resolution, which requires more than 75% of the votes, in order to be legally binding. This higher threshold is to protect the interests of all shareholders given the importance of dividend policies and the potential divergence of views among shareholders.
“Clearly, the board has to follow the rules set out in the articles of association and that is why Western Gate’s proposed ordinary resolution would not be legally effective. The board will always take into account the views of all shareholders in determining the best route for delivering shareholder returns.”
In December 2019, Stock Spirits Group revealed it would invest €25 million (US$27.6m) in growing its distillation capacity in Poland after its full-year profit more than doubled.