6.2 Introducing ChefatHome

Your organisation, ChefatHome, was founded by an inspiring entrepreneur Dany T, who was the first in Australia to bring the concept of fresh produce and excellent recipes together in the home to enable time-poor Gen X-ers to produce a “chef-quality” meal at home within 20 minutes.

For its first 10 years, ChefatHome was run by Dany and her husband Jon, as a private company. To scale the company from its Sydney base, they took it to an Initial Public Offering five years ago.

The IPO was massively over-subscribed, enabling ChefatHome to become the No.1 company in the “convenient home cooking” niche in every capital city in Australia.

Three months ago, Arya, the Chairperson of ICanCook, a US company three times the size of ChefatHome called Dany to ask if she was interested in selling the company. Dany listened attentively for half an hour then politely declined.

Last week Mrs Li, a ChefatHome board member based in Shanghai, received a direct offer from Arya. The lady simply will not take No for an answer…

The ChefatHome Board

The Board consists of Dany, Jon and three Chinese investors. Dany is the largest company shareholder at 20%, Jon has 5% and the three Chinese have 6%, 5% and 4% respectively. The second largest shareholder is an elderly recluse named Sansa who holds 15% but is not interested in the company workings. She will only accept calls from Jon. The rest are “Mum-and-Dad” investors, many of whom are also happy customers.

With the exception of Sansa S, the top private shareholders are all on the ChefatHome Board.

* ChefatHome Board member (Total Board shareholding is 40%)

No other individual shareholders have more than a 1% share.

In this Takeover Case Study, ChefatHome is the takeover target (“target”) and ICanCook is the hostile bidder (“bidder”) attempting the acquisition.

6.2.1 Prioritising Stakeholders

The Takeover Defence project, aka Project SOS, consists of:

•  Tor, the Project Director. He has overall accountability for the project;
•  Missa, long-time EA to Dany T who will share her knowledge of the company’s stakeholders;
• Two professional communications specialists, Talisa and Shae, who will write most of the project communications with the correct content, format and tone; and
• Yourself, the Project Coordinator

 Other highly active members who have been told that this is their No. 1 priority include

• Jaime, the Manager for Marketing, and
• Tyrone, the Manager for Strategy

Because this is a short-term and highly critical project, Jon, the CEO, has given your team free reign to call on any member of his Executive Team in order to make this project successful.

Recognising that the team has limited knowledge; Tor has asked you to try to classify each stakeholder according to the Influence-Interest Grid while he is with Dany and Jon in China. You decide to draft this then utilise Missa’s extensive organisational knowledge to validate it.

Stakeholder Prioritisation

Download the Case Study file Mod 6 Stakeholder Comms Plan and attempt to fill in the tab 1 CS6.1 Stakeholder PI by referring back to the Influence-Interest grid in the previous section. You will find that with some of these you have to make some wild guesses – such is the nature of working in projects.

When you have finished, check your answer against the “corrected” version from Missa in tab 2 CS6.1a Stakeholder PI. Be mindful that you generally need at least subject matter expert (SME) like Missa on your project team.

6.2.2 Takeover Risk Analysis

Three weeks ago Dany engaged Pratt & Pratt, a firm known for their expertise in creating defence strategies against takeovers. Last week, Pratt & Pratt presented their recommendations. The first part is a risk analysis of the various takeover risks. We covered the concepts of risk identification, analysis and treatment in Module 5.

Explanatory notes were included with the risk analysis.

1. Risk R001 Open Market - ICanCook could offer a premium for CAH stock to buy out a large number of the Mum and Dad shareholders. This could be up to 45% of the market
2. Risk R002 Hostile Bid - ICanCook could then persuade Sansa to sell them just half of her stock. This would take them above 50% and give them a controlling stake in the company, enabling them to replace the Board and Management team
3. Risk R003 - If ICanCook were able to grow their stake to just 15 or 20% by either one of the other methods above, they could approach the shareholders to assign them their proxy votes and vote out the Board given it only controls 40% of all votes

6.2.3 Analyse Stakeholder Communications Needs

Now that you have prioritised your project stakeholders, you can begin to analyse each individual or group to determine how often and what format of project communications would suit them. Key stakeholders will also have expectations around who will be delivering the communications to them.

6.2.4 Takeover Risk Treatment

Pratt & Pratt went on to recommend the following takeover defence strategies, which are based on making ChefatHome more difficult, more expensive or more time-consuming to acquire as a target.

 The “Poison Pill” strategy

ChefatHome offers all existing shareholders a right to purchase additional shares at a 20% discount. This would be triggered in the event that ICanCook and their subsidiaries reach a 15% total shareholding.

By encouraging existing shareholders to buy more shares at a discounted price, ChefatHome would become more expensive to acquire. Key to this strategy is the amount of goodwill shareholders had towards ChefatHome.

The “Crown Jewels”/ “White Knight” strategy

The most valuable asset (the “Crown Jewels”) within the ChefatHome business is its established distribution network. Pratt & Pratt suggested that the distribution network could be set up as a separate division and sold off to a “friendly” buyer, aka the “White Knight”.

This would make ChefatHome unattractive to buy since ICanCook  would need to develop its own distribution network in Australia.

If ICanCook insisted on going ahead, it could be possible for Dany to buy back the Crown Jewels from the White Knight after the takeover had been averted and start another business. This strategy would be heavily dependent upon the expertise of Pratt & Pratt and Robert’s management of the stakeholders at the regulator, ASIC.

Proxy Fight and Golden Parachute

While the proxy fight has a low likelihood of occurrence, a Golden Parachute would increase the cost of acquisition by requiring all Board members to be paid out. Dany’s view was that if the shareholders wanted her out, she would go gracefully but not without a handsome pay-out. None of the Board members disagreed.

Key to this strategy would be getting this agreed by a majority of shareholders at the next special General Meeting. Dany would woo the shareholders - how she found her dream, her strong lifelong passion for the company and why she wanted to keep it out of competitor hands, focusing on the Golden Parachute as a deterrent rather than a pay-out.

PR campaign

Since retaining the majority of shares is key to each of the defence strategies, ChefatHome should run a comprehensive PR campaign aimed at shareholders. The campaign would have the following aims:

• Re-establish the family values ChefatHome was founded on – healthy, nutritious and convenient cooking at home for today’s time-poor families. It could even feature Dany and Jon cooking at home after a day in the office.
• Emphasise how ChefatHome helped Australians transition from “meat-and-three-veg” to today’s broad palate of multicultural cuisines
• Educate shareholders about possible takeover attempts and explain clearly why holding onto their shares was the right thing for them and for Australia.

The next Board meeting was an exciting one. Dany won over the Board and all four motions were passed. Funds were allocated for Project SOS and it is now over to the project team to implement and track progress of actions. A summary of the agreed takeover risk analysis along with treatment strategies is provided below. The PR campaign also won full Board support.