Cal-Maine Foods, Inc. Announces Agreement With Company’s Founder’s Family
Also Announces New
Announces Potential Transition to Non-Controlled Company
The Company also announced that its Board has approved a new share repurchase program which authorizes repurchases of up to
As described below, the Company has granted registration rights to the family members to facilitate the sale of Common Shares in the open market, should they decide to sell their shares. It is also possible that the Company could use a portion of its new share repurchase program to repurchase some of the family members’ Common Shares as part of the family’s portfolio diversification efforts. Any repurchases from the family members would require approval from the Special Committee of the Board described below.
Sherman Miller, President and Chief Executive Officer of Cal-Maine Foods, added, “Our share repurchase program underscores our continued confidence in the strength of our business and future cash flow generation, as well as our commitment to returning capital to our valued shareholders. We enjoy a strong cash balance and strong balance sheet. Our management and Board are continually evaluating opportunities to deploy our cash in a manner to achieve the best value for our stockholders. The share repurchase program provides us with another tool to achieve that objective.”
Agreement with Founder’s Family
Cal-Maine Foods has entered into an Agreement Regarding Conversion (the “Conversion Agreement”) with DLNL, LLC (“Daughters’ LLC”) and its members (the “Members”), who include Mr. Adams’ four daughters and Adolphus B. Baker, Board Chair (and Mr. Adams’ son-in-law). The Conversion Agreement was unanimously approved and recommended to the Board by a special committee consisting solely of independent directors.
Daughters’ LLC holds 4.8 million shares of the Class A Shares, representing
The outstanding Class A Shares currently represent approximately
The Members have advised the Company that they are potentially interested in selling all or a portion of the Common Shares held by Daughters’ LLC, including shares that would be issued upon conversion of its Class A Shares. The Members indicated that they were willing to work with the Company towards achieving a smooth transition. Before giving effect to any potential sales, if Daughters’ LLC were to convert all of its Class A Shares into Common Shares, Daughters’ LLC’s total voting power would decline from
Pursuant to the Conversion Agreement, Daughters’ LLC has agreed not to convert any Class A Shares into Common Shares until after the effectiveness of the Restated Charter (as defined below). Daughters’ LLC has also agreed that if it converts any Class A Shares into Common Shares, it will simultaneously convert all (but not less than all) Class A Shares into Common Shares (the “Class A Conversion”). The Conversion Agreement does not require Daughters’ LLC to convert any Class A Shares or to sell any shares.
If the Class A Conversion does occur, the Company would have a single class of common stock outstanding with one vote per share, resulting in the following benefits to stockholders:
- A reduction in the concentration of voting power
- Simplification of the Company’s equity capital structure
- Better alignment of the voting rights and economic interests of all stockholders
- Broader appeal of the Company’s shares to investors, many of which prefer single voting class common stock structures
The Conversion Agreement grants registration rights to the Members, but those rights do not become effective until after the Class A Conversion occurs. The registration rights expire on (1) the 12-month anniversary of the date of the Class A Conversion or (2) December 31, 2026, whichever is earlier.
In connection with the approval of the Conversion Agreement, the Board unanimously approved the adoption of the Company’s Third Amended and Restated Certificate of Incorporation (the “Restated Charter”), which was approved by Daughters’ LLC by majority written consent in lieu of a meeting of stockholders. The Restated Charter will become effective upon filing with the Secretary of State of the
Among other things, the Restated Charter divides the Board into three classes of directors serving staggered three-year terms. Cal-Maine Foods expects the term of the first class of directors to expire at the 2025 annual meeting of stockholders.
The Board plans to establish a fully independent Nominating and Corporate Governance Committee, and the independent directors will appoint a lead independent director, to be effective upon the effectiveness of the Restated Charter.
Dolph Baker, Board Chair of Cal-Maine Foods, stated, “I am confident in the future of the Company, its strategy and its management team. The decisions to consider diversifying our family’s individual financial portfolios are personal decisions made in connection with our own respective financial and estate planning efforts. The Board has asked me to remain as executive Board Chair at least through the Company’s 2027 annual meeting of stockholders, and I look forward to working with our Board and management as we continue to successfully execute our strategy.”
Miller stated, “These arrangements will provide the Company with stability of governance and management during its transition from controlled to non-controlled company status and facilitate the Members’ portfolio diversification in an orderly manner in compliance with legal requirements. Since 1986, Dolph Baker has contributed to the tremendous growth and success of Cal-Maine Foods. We are pleased that he will remain executive Board Chair at least through our 2027 annual meeting, and we will continue to benefit from his deep understanding of the Company’s operations, depth and breadth of experience and continued poultry industry engagement.”
The share repurchase program authorizes Cal-Maine Foods, in management’s discretion, to repurchase up to
Share repurchases under the program may be made from time to time through solicited or unsolicited transactions in the open market, in privately negotiated transactions or by other means in accordance with securities laws. The Company expects that share repurchases under the program will be funded from one or a combination of existing cash balances and future free cash flow. The share repurchase program does not obligate Cal-Maine Foods to repurchase any specific amount of shares, does not have an expiration date, and may be suspended, modified or discontinued at any time without prior notice.
Additional Information and Where To Find It
The Company intends promptly to file a preliminary Information Statement with the
Because the Restated Charter has been approved by the Board and by the stockholder vote required by law, the Company will not be soliciting proxies or holding a meeting of stockholders to consider the Restated Charter.
Additional details regarding the Conversion Agreement, the Restated Charter and related matters are contained in a Form 8-K filed by the Company with the SEC contemporaneously with the issuance of this press release and will also be contained in the Information Statement. Investors may obtain copies of all documents filed by Cal-Maine with the SEC, free of charge, at the SEC’s website, www.sec.gov or at Cal-Maine Food’s website at www.calmainefoods.com/sec-filings.
About Cal-Maine Foods
Cal-Maine Foods is primarily engaged in the production, grading, packaging, marketing and distribution of fresh shell eggs, including conventional, cage-free, organic, brown, free-range, pasture-raised and nutritionally enhanced eggs. The Company, which is headquartered in
Forward Looking Statements
Statements contained in this press release that are not historical facts are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on management’s current intent, belief, expectations, estimates and projections regarding our Company and our industry. These statements are not guarantees of future performance and involve risks, uncertainties, assumptions and other factors that are difficult to predict and may be beyond our control. The factors that could cause actual results to differ materially from those projected in the forward-looking statements include, among others, (i) the risk factors set forth in Part I Item 1A Risk Factors of our Annual Report on Form 10-K for the year ended June 1, 2024, as well as those included in other reports we file from time to time with the SEC (including our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K), (ii) the occurrence of any event, change or other circumstances that could give rise to the Board’s decision to abandon the Restated Charter or to the termination of the Conversion Agreement, (iii) the effect of the announcement of the Conversion Agreement on the Common Shares’ trading price, the ability of the Company to retain and hire key personnel and maintain relationships with its customers and suppliers, and on the Company’s operating results and business generally, (iv) the impact on the Common Shares’ trading price of the sale or marketing, or potential sale or marketing, of a significant number of Common Shares as part of the family’s portfolio diversification, (v) the risks and hazards inherent in the shell egg business (including disease, pests, weather conditions, and potential for product recall), including but not limited to the current outbreak of HPAI affecting poultry in the
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Sherman Miller, President and CEO
Max P. Bowman, Vice President and CFO
(601) 948-6813
Source: Cal-Maine Foods, Inc.