In preparation for the annual meeting on June 28 when shareholders will vote on a new board, the letter implores shareholders to vote for the company-backed slate of candidates, rather than the slate put forward by Wynnefield Capital Management, headed by Nelson Obus. The choice will determine the future direction of the company and even its future existence, the letter claims.
“You are being asked to choose between supporting the continued transformation of Omega into a diversified nutrition company poised to take advantage of strong and growing demand . . . or following Following Wynnefield Capital Management, a short-sighted investor with no long-term strategy to grow stockholder value and no experience in the global nutrition business,” the letter says.
Diversifying into human nutrition
Omega Protein has for many years been a menhaden fishing company that processed its catch of the forage fish into fish meal and fish oil products primarily for the animal nutrition markets. In an effort to capture more value from that resource Omega Protein launched an omega-3 oil ingredient for supplements from menhaden and also acquired several ingredient companies such as Cyvex Nutrition, Wisconsin Specialty Protein, and lipid ingredient specialist Bioriginal in an effort to become less reliant on the fluctuating stocks of menhaden for its revenues.
Obus in the past has maintained that Omega Protein has bungled this diversification into human nutrition markets. He says the company has overpaid for its human nutrition assets. From his point of view, shareholders would be better served if the company were to be broken up and sold off piecemeal.
The board said in its letter to shareholders that this alternative was considered in a recently-conducted strategic review with JP Morgan and was rejected as not being in shareholders’ best long-term interests.
“Your Board and management team have been transforming Omega into a more balanced nutrition company serving not only animal customer segments, but also meeting the burgeoning global demand for better human nutrition. This strategy leverages Omega's core nutritional capabilities to supply customers in the feed, food and supplement sectors while focusing on growth and efficiency initiatives. Our strategic plan creates near-term value and positions us to drive greater returns over the long term,” the letter says.
The letter notes that Omega Protein has bowed to Wynnefield’s request to have its candidate David Clarke added to the slate of board nominees. Clarke does have significant expertise in menhaden fisheries and in human nutrition businesses, whereas the other board members do not, the letter says.
Omega Protein said in the letter that its board has spent “many hours interviewing and carefully considering each of Wynnefield's three original director candidates, as well as other candidates. The Board believes in having healthy disagreements and debates in the boardroom. We welcome independent, high quality directors with complementary skillsets. That is why the Board decided to include Mr. Clarke in its slate, even though Wynnefield refused to entertain a settlement on customary terms.”