Is Maple Leaf In For A Fight?
Posted by Jeff Lefler on October 7, 2010
From Boyd Erman at Globe & Mail: Did Maple Leaf do enough to avoid a fight?
Maple Leaf Foods Inc. may have a fight on its hands.
The meat and bakery company’s new plan to improve its results looks a lot like the old plan to improve results. That’s unlikely to be enough to placate the activist shareholders at West Face Capital Inc., who took a big stake in Maple Leaf this summer.
The fact that Maple Leaf is largely sticking with its original plan to invest in its businesses to try to drive margins higher could be read as a direct challenge to West Face.
West Face head Greg Boland and his partners at the firm have been silent about their plans since acquiring the stake, but given that they weren’t satisfied with the company’s original direction, this seems unlikely to change that.
One of the issues that is believed to bother West Face is the level of capital spending at Maple Leaf. The new plan sticks to many of the capital projects underway, and adds a new meat facility.
“It’s unlikely they [West Face] are supportive of the Maple Leaf Foods plan given the level of capital investment required,” National Bank Financial analyst Jim Durran said in a note. Mr. Durran said he’s optimistic that the shares will continue to perform well, because either Maple Leaf shows results on its plan or West Face will start to agitate more vigorously for change.
“We expect to see continued improvement in investor sentiment as the market’s expectations for value-creation strengthen – whether this occurs through MFI’s long-term strategic plan or other value-creation activities initiated by West Face remains to be seen.”
