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Endangered Yowie at centre of bitter investor squabble

Cadbury ceased production in 2005, reportedly after falling out with its creators over the global rights to the brand.

That would have been the end of the story, until a small Perth-based business bought Yowie’s intellectual property in 2012 and set about restarting production.

In a remarkable coup, it secured space on the shelves of American giant Walmart. Several other US major retail chains followed.

The ASX-listed Yowie Group’s revenue soared from nothing in 2014 to $17 million two years later, and Yowie shares became almost as popular to collect as the figurines once were. The share price shot up from 19¢ in early 2014 to $1.31 in mid-2015.

Continuing the early growth however was harder than the company and its shareholders expected, says Yowie’s chairman Louis Carroll. They company has run at a loss for the past six years and its shares have plunged to 7¢.

“Shareholders are understandably disappointed with the performance of this business,” says Carroll.

Shareholders are understandably disappointed with the performance of this business.

Yowie’s Louis Carroll

“Unfortunately, unrealistic expectations were set early in the businesses life about the extent to which its very fast, early success could be repeated and extended.”

Yowie had developed a “more sensible and considered plan for growth” after he joined the company in early 2017, and it relaunched in Australia that year in Woolworths supermarkets.

Things were back on track and going well until about 18 months ago, Carroll says.

That’s when Kinder Surprise – the world’s most famous toy-inside-a-chocolate product – hit US supermarkets, after a decades-long ban because they were considered a choking hazard to children.

Kinder Surprise has turned up the competitive pressure on Yowie

Kinder Surprise has turned up the competitive pressure on Yowie

The new egg smashed Yowie’s sales, which month-on-month fell as much as 30 per cent during a Kinder Surprise marketing onslaught. Yowie’s revenue fell about 6 per cent in 2018, and a further 4 per cent in the first half of 2019.

With its shares sagging, three funds linked to infamous corporate raiders Nick Bolton and Farooq Khan – Keybridge Capital, Bentley Capital and Aurora – bought into the company in early 2018.

Since then, they have been using their combined 23 per cent stake to try to remove board members and take control of the company.

Bolton shot to public attention in 2009 when, aged just 26, he mounted an audacious $4.5 million raid on Macquarie’s toll road project BrisConnection.

Nicholas Bolton

Nicholas Bolton Credit:Jessica Shapiro

The Australian Securities and Investments Commission (ASIC) later banned him from serving as a company director for three years over his involvement in 13 separate companies which all collapsed, leaving combined debts of $25 million.

Bolton and Khan have a history of going after companies that, like Yowie, have cash piggy banks worth more than their market value.

William Johnson – who is a director at both Bolton’s Keybridge and Khan’s Bentley – was appointed to Yowie’s board in April last year, and then in August Aurora called a shareholder vote to boot Carroll from the company.

The vote was called off and Johnson resigned in October. In March this year, Keybridge launched and then withdrew a 9¢-a-share takeover bid for Yowie.

Keybridge Capital's Farooq Khan at the Molopo AGM.

Keybridge Capital’s Farooq Khan at the Molopo AGM.

Aurora then launched its own takeover for Yowie in May, also offering 9¢ of Aurora script per Yowie share, which it says is a healthy premium to Yowie’s current share price and a good deal considering the company’s uncertain path to profit.

But Carroll says the offer is “ridiculous” because it is worth less than even the company’s cash backing, essentially valuing the ongoing Yowie business in negative terms.

Carroll has an influential ally in his corner in high-profile investor Geoff Wilson, who was making headlines this year as he led a self-funded retiree revolt against Labor’s franking credits policy.

He has personally bought a 1.5 per cent stake in Yowie, and has used that position to warn other shareholders off supporting Bolton and Khan’s advances.

Wilson Asset Management Chairman Geoff Wilson.

Wilson Asset Management Chairman Geoff Wilson.Credit:Dominic Lorrimer

“There’s enormous risk that the control of the company will go to people who will just squander the cash,” Wilson says.

“The reason why I got involved in this [at Yowie] is that it’s important to stand up for the retail investors.”

It’s the latest skirmish in an ongoing fight between the Wilson and the Bolton/Khan camps.

Two years ago Wilson intervened in the Bolton-Khan takeover of Molopo Energy, and last month Wilson launched his own takeover bid for Keybridge. He has also tried to boot Aurora from managing the fund that is invested in Yowie, citing its underperformance.

Adding to the drama, Wilson acquired more Yowie shares when Keybridge launched its Yowie takeover in March.

But combined with the Yowie shares held indirectly through the stake Wilson had built in Keybridge and Aurora, that move pushed his voting power in Yowie from 19.7 per cent to 32 per cent.

The Takeovers Panel, prompted by Keybridge, weighed in and ruled Wilson had breached the corporations law forbidding shareholder buying shares that bump their voting power above 20 per cent, and has forced the sale of a 13 per cent stake in Yowie he held.

Bolton says that while he owns 49 per cent of Aurora, he has no influence over that fund’s actions, and meanwhile Keybridge is simply trying to protect its investment.

“We are taking steps to ensure that we have a proportional involvement in the corporate governance of the company to try to preserve and maximise shareholder value”, he said in an email.

Aurora’s bid opens this Friday and will be live until August 23. Keybridge has called another shareholder vote in August to try and sack Carroll and Yowie’s other two directors.

Carroll says he is optimistic that the takeover bids will not succeed, and in a sweetener to shareholders, announced a 2¢ a share return to investors earlier this month.

He can’t predict when the company will be able to turn a profit, but sees the Yowie brand continuing to grow, with two new products will launch in the US this year and it trying to get more retailers on board in Australia.

“There’s clear value in the Yowie brand,” Carroll says. “There is institutional memory of the product, even though people who remember it are the parents of the people who are eating it.”

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