Shares in Tasmania-based baby formula business Bellamy's Australia Ltd (ASX: BAL) remain in a trading halt while the company buys time to renegotiate agreements with suppliers, although it now faces other problems as one substantial shareholder is demanding a major management shake-up at the company.
After multiple earnings downgrades the stock collapsed in half over the second half of 2016 and the company has now revealed that an investment group named the The Black Prince Private Foundation is seeking to spill the board.
The Black Prince foundation owns 14.5 per cent of the shares in Bellamy's and wants to requisition a general meeting of the company to seek a motion that would see four current board members at Bellamy's replaced by The Black Prince Group's own nominees. Bellamy's chairman, Rob Wooley, has rejected the proposal and it's likely the CEO, Laura McBain, will be against it as well.
The future of Bellamy's CEO is in the spotlight as she's ultimately responsible for negotiating Bellamy's forward supply agreements and managing its inventory. Given the major problems, it would not be a surprise to see the CEO follow the board members out the door pronto if the board spill is successful.
The News Ltd press reporting that one issue up for negotiation during the trading halt is a $5.5 million per year forward supply contract with dairy supplier Fonterra (ASX: FSF) that is currently in place until November 2020. While other issues are believed to include inventory levels and the possible need to revise down FY17's earnings forecasts once again.
Investors are likely to throw a major tantrum when Bellamy's does return to the ASX boards.
