SECAUCUS, NJ. and NEW YORK — Freshpet and JANA Partners, an activist investor that owns 9.3% of the fresh pet nutrition company, have entered a proxy battle over recent changes to Freshpet’s board of directors.

On May 24, JANA Partners announced plans to nominate four candidates for Freshpet’s board of directors at the company’s 2023 Annual Meeting of Stockholders, including Diane Dietz, former CEO of Rodan & Fields; Timothy McLevish, who has held several chief financial officer roles in the consumer goods sector; Scott Ostfeld, managing partner and portfolio manager at JANA; and Kurt Schmidt, former CEO of Blue Buffalo.

The nominations, according to JANA Partners, aim to steer the company back on track in terms of management, governance and capital allocation, as well as “restore credibility” in the company.

“We believe Freshpet’s pattern of missteps stems directly from a board that has disregarded its most basic duties to shareholders,” JANA Partners stated in its letter to Freshpet shareholders on May 24. “While recent management changes are a step in the right direction, we have observed a board that has, over multiple years, failed to properly supervise management as performance worsened, liquidity deteriorated and shareholder value plummeted. Worse still, these problems unfolded while more than half of Freshpet’s independent directors pursued outside interests with corporate resources and key members of management.”

JANA Partners alleged several board-driven downfalls in its shareholder letter, including capital mismanagement, missing guidance targets, establishing a “misaligned management compensation program,” and allowing key leadership and board members to benefit from the success of competing companies, including Hive Brands and Compana Pet Brands.

Freshpet issued a rebuttal later that day, claiming JANA’s “sole purpose is to force a sale of the company without consideration of all potential paths to value creation.” According to Freshpet, it has pushed back on this intention but offers to “reach a constructive resolution” were rejected.

“We will continue to regularly evaluate the board’s skillsets and composition to make sure it is well positioned to oversee and guide management as we continue to execute our strategy,” Freshpet concluded in its May 24 statement.

On May 25, JANA Partners issued a letter to Freshpet’s legal counsel urging the fresh pet food company to expand its board to allow room for its four nominees. According to JANA, Freshpet moved up the date of its annual meeting to July to block these board changes, considering the meeting has historically taken place later in the fall.

“The Freshpet board has a track record of poor decision making, lax oversight and apparent disregard for corporate governance,” stated Barry Rosenstein and Scott Ostfeld, managing partners at JANA. “The board’s latest stunt — reducing the number of directors up for election amid a contested Annual Meeting and abruptly accelerating its date — is an overt attempt to influence the shareholder vote, and underscores why board change is desperately needed. The board must immediately remedy its corporate governance failures and permit shareholders to participate in a fair and democratic election of directors.”

The letter from JANA’s legal counsel gave Freshpet until 5 p.m. Eastern on May 30 to confirm the board expansion. Freshpet instead issued a letter in response, dated May 25, which makes various cases against JANA’s allegations. Freshpet noted the upcoming retirement of Board Chair Charles Norris was known and publicly disclosed in 2020. The letter also noted that the rescheduling of its board meeting would have actually provided an earlier opportunity for JANA’s nominations to be elected to the board, rather than “pretext to reduce the size of the board,” as described in JANA’s previous letter.

“The board has acted in the best interests of all stockholders, in accordance with the directors’ fiduciary duties, and in compliance with the charter’s requirements,” the letter stated. “Should JANA decide to challenge these actions or otherwise continue to make ill-informed and baseless accusations, the company intends to vigorously defend itself and its record.”

On June 1, JANA Partners filed a lawsuit in Delaware against Freshpet and its board of directors.

“The Freshpet board’s recent entrenchment actions constitute a clear breach of its fiduciary duties, leaving us with no choice but to seek expedited relief in Delaware Court so that a truly fair and democratic election of directors is allowed to proceed,” Rosenstein said.

On June 2, Freshpet publicly announced its offer to meet with JANA’s independent director nominees following the unplanned resignation of David Basto from its board.

“We believe the Freshpet board’s latest bid to patch its fundamental governance issues with the smallest, halfhearted adjustment is yet another self-serving attempt to preserve the status quo,” Rosenstein said in JANA Partners’ statement in response to Freshpet’s public announcement on June 2. “While the long overdue resignation of David Basto might cure a symptom, we believe the root cause of the board’s seeming dysfunction — rampant conflicts of interest, oversight failures, breaches of fiduciary duty and entrenchment tactics — all remain unaddressed.”

As the latest development in this saga of events, Freshpet announced June 6 its decision to postpone its 2023 Annual Meeting of Stockholders from July to October in light of the continuing situation.

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