A board shake-up at the nation´s largest fish meal and fish oil producer is likely to change the company´s direction
The largest harvester of menhaden and processor of fish meal and fish oil in the country ,Omega Protein Corp.of Hudson ,had a stockholder vote in June that shoop up the firm´s board of directors .Menhaden ,the little oily fish Native Americans once used to fertilize corn crops ,is now one of the most valuble fish in the sea.Omega Protein operates eight manufactures facilities located in the Unites States ,Canada and Europe ,and works more than 30 vessels to harvest menhaden in Chesapeake Bay ,the Gulf of Mexico and the Atlantic Ocean .
For generations menhaden have been factory processed to make fish oil and fish meal , a protein ingredient used mostly in feeds for aquaculture fish ,dairy and beef cows ,swine ,poultry , and pets .A number of years ago , Omega moved into human nutrition markets ,using omega-3 ingredients refined from its fish oil .The firm purchased several dietary companies and grouped them into a division named Nutegrity .The move was spearheaded by Omega´s board of directors ,which stated that their “strategic nutrition company ,with greater growth opportunities “.
The move into the human nutrition market ,however led to a stockholder confrontation between the board of directors and Wynnefield Capital Management , a New-York -based hedge fund company that holds 7.9 % of Omega pack.
In 2015 Wynnefield filed with the Securities and Exchange Commission , calling for alternative business plans ,including the potential breakup of the company and sale of assets .
On Aug.11 ,2015 ,Nelson Obus ,managing member of Wynnefield ,wrote to Gary Goodwin ,chairmen of the Omega board , saying :” In the 23 years of managing our small cap value fnd ,Wynnefield Capital Management ,LLC and its affiliates (Wynnefield) have never been observed a more glaring case of Diworsification than the risky and unsucceful effort of Omega Protein Corporation to enter the human nutrition field .”
Obus ´letter also stated :”The ugly truth is that the Omega Protein board and its management have flushed away $150 milllion of shareholder value trying to enter a business that the board and management lacked the skill sets to integrate ,manage or execute on a succesful strategic plan .”Wynnefield demanded that the board ” , must entail the immediate hiring of reputable investement bancking firm to explore all strategic alternatives to maximize and release shareholder value ,including the sale of Omega Protein or its assets .”
“To cut to the chase , ” Obus warned , “Wynnefield believes that , as a result of the board´s poorly executed and unsuccesful actions ,it has forfeited the right to maintain Omega Protein as a public company .Let´s not engage in a costly proxy battle that will ultimately end in Omega Protein´s shareholders outsing the current board”.
In the following months , Wynnefield would push for the replacement of board member Gary Erners , a former chief financial officer at two major health company in 2014 to advice on its investments in the human supplement market .The company ´s board of directors embraced Ermers .
When the board of directors challenged Obus ´opinion ,Wynnefield set out to change the makeup of the board by eventually nominating their own candidates ,David H. Clarke and Michael N. Christodolou .The New York firm was able to persuade stockholders that the direction of the company´s human nutrition revenues were not supportive to the overall financial health of Omega .
In the months leading to a proxy vote in June ,the conflict escalated .A June 8 letter to stockholders from the Omega board supported Ermers and countered Wynnefield´s attacks by saying ,”your vote in the ongoing proxy contest waged against Omega Protein by a single self-interested stockholder ,Wynnefield Capital Management ,will have significant impact on the future of your company .”