C&C Group shareholder urges drinks supplier to consider sale

Drinks manufacturer C&C Group has come under fire from one of its shareholders, Engine Capital, for being a “perennial underperformer”.

The US-based private investment firm owns just under 5% of C&C’s shares and has gone public over its concerns about the beverage supplier, publishing an open letter urging it to conduct a strategic review in preparation for a sale.

Written by Engine Capital managing member Arnaud Ajdler, the letter accused C&C, which manufactures drinks including Tennent’s lager and Magners and Bulmers cider, of being “deeply misunderstood and undervalued by the market because of a combination of structural and self-inflicted problems”.

Ajdler believes the issues relate to C&C’s “small size and the complexity of its portfolio”, and that it is “unlikely to ever be properly valued in its current form”.

He also pointed to the fact that the firm has had four CEOs in less than four years as “further compounding uncertainty and execution risks”. The latest CEO change saw Ralph Findlay, the former chief executive of Marston’s, stepping into the role this month, taking over from Patrick McMahon following the discovery of accounting mistakes and errors in the company’s results.

The name at the top is expected to switch again, as Findlay will only remain in the position for between 12 and 18 months, with recruitment for McMahon’s successor expected to start in the autumn.

Nevertheless, despite what Engine Capital’s Ajdler termed as “succession missteps, strategic mistakes, execution blunders and an inability to return to its higher historical earnings profile”, he feels that C&C remains an attractive acquisition target “given the quality of its assets” and recommended that a private equity buyer would be able to reduce the company’s cost of capital.

In response, C&C’s board issued a statement acknowledging the letter and saying: “The board welcomes feedback from all shareholders and has a clear focus on creating shareholder value.”

The reply further asserted that the underlying performance of the business has been in line with expectations, and that progress had been made in returning capital to shareholders.

The board wrote: “Operationally, the key priority is to deliver the substantial actions currently being progressed at pace throughout the business, driving forward both brand and distribution revenue, improving margin, while returning up to €150m by the end of FY27.”

The group’s next annual report is expected to be issued before the end of June 2024.

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