MGP Ingredients, Inc. Sends Letter to Stockholders From Chairman John Speirs
Independent Chairman John Speirs Discusses the Company's Plan to Create
Stockholder Value and Commitment to the Atchison Community
Recommends Stockholders Vote MGP's WHITE Proxy Card and Reject the Cray
Group's Nominees and Proposals
ATCHISON, Kan., July 25, 2013 (GLOBE NEWSWIRE) -- MGP Ingredients, Inc.
(Nasdaq:MGPI) (the "Company") today announced that it sent a letter urging
stockholders to reject the Cray Group's dissident nominees and proposals by
signing, dating and returning MGP's WHITE proxy card.
Included below is the full text of the letter to MGP stockholders, which can
also be found at www.mgpingredients.com:
A CANDID CONVERSATION WITH JOHN R. SPEIRS
CHAIRMAN OF MGP INGREDIENTS, INC.
WHAT IS YOUR BACKGROUND AND WHY DID YOU JOIN MGP?
I have been fortunate to serve on the MGP Board since 2004 and as Chairman
since 2009. I was very familiar with MGP through my work with them as a
client of Stellus Consulting, a Minneapolis-based strategy consulting firm I
co-founded, as well as through my 35 years of leadership experience across
companies in the food and alcohol industries including, Diageo PLC,
Pillsbury and Lever Brothers.
Bud Cray, the Chairman at the time, and Ladd Seaberg, the CEO, asked me to
join the Board, which I did because I had tremendous respect for them and
MGP, and I was excited about its future potential. Importantly, I also
appreciated that the founding Cray family wanted to bring in professional
leadership to help take MGP to the next level and ensure ALL stockholders
would benefit. It was – and is today – a place where I felt my skills and
experience could be put to good use helping a great company grow and
WHAT ARE "INDEPENDENT" DIRECTORS AND WHY ARE THEY SO IMPORTANT AT MGP?
Independent directors are members of the Board of Directors who are not part
of the management team. In companies where there is a very large owner, like
the Cray family at MGP, independent also means people who are not in some
way connected with the family.
In a company like MGP, where the Cray family controlsover 90% of the
preferred stock and owns 27.5% of the common stock, it's especially
important that independent directors have a voice and are able to speak for
and act in the best interests of all stockholders.Because they control
nearly all of the "preferred" shares, the Cray Group can elect five of the
nine directors on the Board.That means they can pick whomever they want for
those five seats and common stockholders like you can do nothing about it.
This year, three Board seats are up for election – two that the Cray family
controls and one that common stockholders can vote on.The seat I am in is
the only one over which common stockholders have a say this year, and now
the Cray Group wants to fill that seat with their own hand-picked
nominee.Also, several of the Cray Group's proposed governance changes, if
adopted all together, would give the Cray Group the ability to dismiss and
elect certain directors whenever they want for any reason.
We believe that the governance changes and Board nominations, together with
their control over the preferred stock, would give the Cray Group a clear
path to asserting dominance over MGP, which would undermine the very
independence that must exist at public companies.In our view, MGP would
become a quasi-private, family-run company and common stockholders would get
nothing in return for handing the Cray Group the keys to MGP.
All of the directors on the Board, except apparently for the two Cray family
representatives, firmly believe stockholders should act to make sure strong,
independent voices remain on MGP's Board.Remember, Mrs. Seaberg and the
Cray Group previously thought that your independent directors were valuable
to MGP because they voted them onto the current Board.In the end, I believe
a stronger MGP is better for our stockholders, customers, employees and
community and that's what my fellow independent directors and I are trying
HOW ARE YOU AND THE OTHER INDEPENDENT DIRECTORS CREATING VALUE AT MGP?
For many years, despite doing some things right, MGP didn't make important
investments in its physical plant, technology and employees, leaving it at a
significant competitive disadvantage.MGP was not prepared to adapt to the
changing economy.Over the past few years, my fellow independent directors
and I, along with our talented management team, have changed that.
MGP's focus for much of its existence has been on the production and
commercialization of beverage and industrial grade alcohol and specialty
wheat proteins and wheat starches for both food and non-food uses.That
business served MGP well for years, but with greater competition and severe
swings in commodity prices it wasn't generating the profits it used to.It
was time to look for new opportunities.
We saw those opportunities in higher value added products in the premium
alcohol business, like bourbons and whiskeys.I know this business very well
through my years in the spirits industry, and I knew it represented an
opportunity to break away from commodity influence and solidify MGP as a
serious competitor in premium spirits and flavor innovations where the
profits are higher, there are fewer competitors, and MGP has a solid
So we have focused on premium distilled spirits, as well as nutritional
health innovations, while also ensuring we remain a low cost industrial
alcohol producer.We have been able to make these strategic changes while
improving the systems and accountability throughout the organization
enabling us to increase the return we generate on our assets from about 6%
between 2005 and 2009 to over 18% from 2010 to 2013.Just like in any
transformation, there have been highs and lows, but we firmly believe MGP is
on the right path and we are seeing results.
We are doing more business with existing customers and serving important new
customers.Over the past four years, we have nearly doubled our mix of high
value added sales, increasing from an average of 44% between 2005 and 2009
to an average of 82% from 2010 to 2013.The first quarter of 2013 marked
MGP's fourth consecutive quarter of growth in income from operations,
reaching $1.2 million compared to a loss of $2.3 million in the prior year
and over the same period our percentage of profit on sales more than doubled
from 3% to 8%. These are early signs, but significant ones, and we believe
the beginning of MGP's return to sustainable profitability, long-term growth
and driving value for ALL stockholders.
HOW IS MGP SUPPORTING ITS BUSINESS AND COMMUNITIES LIKE ATCHISON?
Part of our strategic shift included investing in the business, which in
turn was an investment in the communities where we operate.For example,
this Board directed the investment of $27 million into the expansion and
upgrade of MGP's facilities in Atchison, including the construction of a
Technical Innovation Center and the installation of a $10 million
closed-circuit water cooling system to bring MGP into compliance with
environmental emissions standards.We also made additional investments
beyond the $27 million in important quality and safety upgrades and improved
our financial reporting systems so we could manage the business better.As a
result, our operations run at higher profitability, use less energy and we
utilize our assets more efficiently.We are heavily invested in the Atchison
community.The bottom line is a stronger MGP is better for Atchison, and our
stockholders, and we've done a lot to make sure MGP remains strong for many
years to come.
IS IT TRUE YOU ARE YOU TRYING TO SELL MGP AND LEAVE ATCHISON?
As independent directors we have been very clear, for as long as we remain
directors, we plan to keep MGP headquartered in Atchison.We believe a
strong MGP is good for Atchison, our employees, our customers and our
stockholders.We have undertaken considerable efforts to strengthen MGP's
position with that in mind.
We also recognize the need to continually evolve. To ensure we are exploring
all avenues to maximizing value for stockholders, the independent members of
the Board are looking at everything to make sure we are on the path that
will create the most value. Contrary to the Cray Group's statements, this
does not necessarily mean MGP, or even pieces of the business will be sold.
HOW DO YOU RESPOND TO THE CRAY GROUP'S CRITICISMS OF MGP'S CEO, TIM NEWKIRK?
Tim is an excellent CEO.He has led MGP through a number of important
changes and helped to establish a path to future growth for the company.Tim
is a long-time veteran of MGP and an Atchison "lifer."He has worked his way
up from distillery shift manager through various operating roles before
being selected by the Board, including by Bud and Karen, to take over as
MGP's first non-family member CEO.
He knows this business inside and out, probably more than anyone else at
MGP.He has successfully overseen the implementation of our strategy,
including process improvements across nearly every aspect of the business
and the acquisition of our Lawrenceburg distillery.He has worked hard to
create an open, supportive and performance-focused culture at MGP, and as a
result has attracted and retained top talent with experience from large
consumer packaged goods companies.In addition, he has motivated and excited
the team with the new direction we have been taking the company, leading to
low levels of employee departures.And this is not just our viewpoint.The
Board has received comments from our customers, suppliers and the banks that
provide our financing praising Tim and his management team for MGP's
strategy and the progress they have made in implementing it.
We are at a critical juncture in MGP's transformation.Even Karen Seaberg
acknowledges that we are on the right path.We are seeing the focus on
premium products gain traction and beginning to see early returns come
in.To switch management at this point and lose an important architect of
the reinvigorated business we believe would be detrimental to MGP, to you as
a common stockholder, and to Atchison.
All of us independent directors recognize the contributions Tim has made to
MGP and we also have worked hard to make sure that compensation for Tim and
the other executives aligns their pay with performance.Establishing the
high levels of performance and personal accountability that stockholders
expect from a public company has been an important part of our
Karen and Bud have been part of those discussions and approved (not just
once, but twice in the last year) the very pay packages they are now
criticizing.It is puzzling that Mrs. Seaberg, as the leader of the Cray
Group, has so suddenly turned on management, especially since the Cray
family themselves openly supported Tim to be the first non-family member CEO
of MGP and furthermore, picked him to serve on the family's trust.
HOW CAN I BEST SUPPORT MGP?
Vote the WHITE proxy card.We sent you one of these cards with our proxy
statement and there's another one with this mailing.You can use either of
them.You'll see on the WHITE card instructions for how to vote in three
different ways.You can pick to vote by telephone, Internet, or by
mail.Under no circumstances should you use the Cray Group's gold proxy
card.You can put it in the recycling bin.
Thank you for taking the time to stay informed.We appreciate your continued
support of MGP and urge you to vote the WHITE proxy card today.
/s/ John R. Speirs
John R. Speirs
Chairman of the Board
If you have questions about how to vote your shares, or need additional
assistance, please contact the firm assisting us in the solicitation of proxy
Innisfree M&A Incorporated
Stockholders Call Toll-Free: (888) 750-5834
Banks and Brokers Call: (212) 750-5833
Vote the White Proxy Card today!
FORWARD-LOOKING STATEMENTS SAFE HARBOR
This letter contains forward-looking statements as well as historical
information. Forward-looking statements are usually identified by or are
associated with such words as "intend," "plan," "believe," "estimate,"
"expect," "anticipate," "hopeful," "should," "may," "will," "could,"
"encouraged," "opportunities," "potential" and/or the negatives of these terms
or variations of them or similar terminology. They reflect management's
current beliefs and estimates of future economic circumstances, industry
conditions, company performance and financial results and are not guarantees
of future performance. All such forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those contemplated by the relevant forward-looking statement.
Investors should not place undue reliance upon forward-looking statements and
MGP undertakes no obligation to publicly update or revise any forward-looking
statements. Important factors that could cause actual results to differ
materially from our expectations include, among others: (i) disruptions in
operations at our Atchison facility or Indiana Distillery, (ii) the
availability and cost of grain and fluctuations in energy costs, (iii) the
effectiveness of our hedging strategy, (iv) the competitive environment and
related market conditions, (v) the ability to effectively pass raw material
price increases on to customers, (vi) the viability of the Illinois Corn
Processing, LLC ("ICP") joint venture and its ability to obtain financing,
(vii) our ability to maintain compliance with all applicable loan agreement
covenants, (viii) our ability to realize operating efficiencies, (ix) actions
of governments, (x) and consumer tastes and preferences. For further
information on these and other risks and uncertainties that may affect our
business, including risks specific to our Distillery and Ingredient segments,
see Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended
December 31, 2012.
IMPORTANT ADDITIONAL INFORMATION
MGP Ingredients, Inc., its directors, and certain of its officers are
participants in the solicitation of proxies from MGP stockholders in
connection with MGP's 2013 Annual Meeting of Stockholders.Important
information concerning the identity and interests of these persons is
available in the definitive proxy statement that MGP filed with the SEC on
April 11, 2013 as subsequently supplemented or amended, including the amended
definitive materialsdated July 12, 2013.
The definitive proxy statement, any other relevant documents and other
materials filed with the SEC concerning MGP are available free of charge at
www.sec.gov and www.mgpingredients.com. Stockholders should carefully read the
definitive proxy statement, including supplements there to, before making any
CONTACT: Investors & Analysts:
George Zagoudis, Investor Relations
913-360-5441 or firstname.lastname@example.org
Shanae Randolph, Corporate Director of Communications
913-367-1480 or email@example.com
MGP Ingredients, Inc. logo
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