Lifeway Foods: ISS Proxy Recommendation Sparks Acquisition Speculation

Lifeway Foods (LWAY) is facing a potential acquisition due to a feud within the founding family. ISS has recommended a proxy vote against the company's management, which could impact the bull case for the stock. The situation may lead to a change in ownership or a shift in management, potentially affecting the company's direction and performance.

Lifeway Foods (LWAY), a leading producer of probiotic food products, is currently embroiled in a high-stakes battle between its management and an activist investor group led by Edward and Ludmila Smolyansky, who collectively own around 26% of the company. The Smolyanskys have initiated a consent solicitation to replace the current board and implement major governance reforms, including anti-nepotism bylaws and the repeal of post-2023 board bylaw changes. Their campaign aims to pave the way for a potential acquisition by Danone, which has previously offered to acquire Lifeway at a premium.

Institutional Shareholder Services (ISS), a leading proxy advisory firm, has recommended that shareholders vote against the Smolyanskys' consent solicitation. ISS highlighted that Lifeway's financial performance has been directionally positive, with the share price rallying over the past year on multiple positive earnings announcements. The firm noted that Lifeway's total shareholder return has significantly outperformed peers in the Russell 3000 Food Producers Index. ISS also criticized the dissident group's critiques, stating that they are "generally presented without adequate context" and that the group "does not clearly establish how various developments have actually impacted shareholder returns" [1].

Lifeway's CEO, Julie Smolyansky, welcomed ISS's recommendation, stating that it supports the company's belief that the consent solicitation is unwarranted and disruptive. She emphasized that the company's financial performance and shareholder returns are strong, and that the proposed changes are not in the best interest of Lifeway shareholders [1].

The Smolyanskys argue that the current board's actions, such as the rejection of Danone's offer and the adoption of a poison pill, are detrimental to shareholders. They are seeking shareholder support to replace the incumbent directors and enable an independent evaluation of Danone's offer. The Smolyanskys have until August 1, 2025, to secure the necessary shareholder consent [2].

Lifeway Foods is scheduled to report earnings on August 12, 2025, which could provide further insight into the company's financial health and the potential impact of the ongoing saga on its performance. The company's valuation remains driven by the potential for a Danone acquisition, with the stock price up 3.4% year-to-date amid the board battle and multiple takeover bids [3].

References:
[1] https://seekingalpha.com/news/4474087-proxy-firm-iss-backs-lifeway-foods-over-activist-investor-group-in-board-battle
[2] https://www.stocktitan.net/news/LWAY/edward-smolyansky-provides-update-on-consent-solicitation-to-restore-0twxzkipix1z.html
[3] https://seekingalpha.com/article/4806872-lifeway-foods-is-iss-proxy-recommendation-bad-news-for-the-bull-case