US egg major Cal-Maine Foods has reached an agreement that will see its founding family relinquish the bulk of its voting power while keeping its economic interest.
The Mississippi-based company said on yesterday (25 February) it signed a conversion agreement with Daughters’ LLC (DLNL), a vehicle that includes the include four daughters of company founder Fred R. Adams Jr.
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Adolphus Baker, Cal-Maine’s board chair and Adams’ son-in-law, is also a member of DLNL, which holds all 4.8 million Class A shares in the company and 1.1 million common shares.
The agreement could lead to the potential conversion of the family’s super-voting Class A shares into common stock, a company statement said.
The change would lead to a new governance structure at Cal-Maine and a potential diversification of the family’s financial holdings.
At present, Class A shares in Cal-Maine hold ten votes per share, compared to one vote per common share.
If all Class A Shares are converted, Cal-Maine Foods’ stock will consist of a single class, each share carrying one vote.
According to the company, converting the shares into common stock would not affect the controlling stockholder’s 12% economic interest in Cal-Maine. However, its voting power would decrease from 53.2% to 12%.
The process will simplify the company’s equity capital structure, and broader investor appeal due to the elimination of dual-class shares.
Commenting on the new agreement, Baker said: “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.
Baker said the board has requested him to “remain as executive board chair at least until the company’s 2027 annual meeting of stockholders” and added: “I look forward to working with our board and management as we continue to successfully execute our strategy.”
The company’s board has approved amendments to its charter and bylaws to align with the new governance structure.
Additionally, the board will establish a nominating and corporate governance Committee and appoint a lead independent director on the governance changes taking effect.
To prepare for the potential changes, Cal-Maine’s board of directors has approved a $500m share repurchase programme.
Cal-Maine Foods president and CEO Sherman Miller said: “Our share repurchase programme 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.
“The share repurchase programme provides us with another tool to achieve that objective.”
Headquartered in Ridgeland, Mississippi, Cal-Maine markets eggs across most of the US.
In October, Cal-Maine announced plans to invest $40m in new capital projects to expand cage-free production.
