Bubs chair Katrina Rathie says Peter Nathan’s involvement in A2 Milk class actions will harm US, China ops

A date has finally been scheduled for shareholders to vote on Bubs’s board spill led, and chair Katrina Rathie is cautioning against sacked CEO Kristy Carr’s chosen successor.

Bubs chair Katrina Rathie has warned shareholders about installing Peter Nathan as the company’s next chief executive, fearing his appointment would potentially derail its US and refreshed China strategy.

In a letter to investors sent to ward off a board spill from a group of dissident shareholders led by former chief executive Kristy Carr and executive chairman Dennis Lin, Ms Rathie said Mr Nathan had been named as defendant in two class actions against A2 Milk.

Shareholders will vote on the spill on July 27.

Ms Carr has put forward Mr Nathan, who was A2’s former Asia Pacific boss, as Bubs’ next chief executive. But Ms Rathie was concerned the A2 lawsuits – which investors have lodged after more than 70 per cent was wiped off A2’s market value – would harm Bubs’s reputation and burgeoning US business.

“A2 Milk is currently defending two shareholder class actions for an alleged failure to meet continuous disclosure obligations and making allegedly false and misleading statements in connection with the deterioration in A2’s sales in China, during the period when Mr Nathan was chief executive officer Asia Pacific,” Ms Rathie wrote.

“The board believes the ongoing class actions present significant reputational risks for Bubs at a critical time when it is seeking FDA approvals in the US and reviewing its China strategy.

“Aside from the negative reputational risks to Bubs from appointing Mr Nathan, in the board’s view, we do not believe he has the right experience to lead Bubs new strategy, particularly as it relates to China.”

Peter Nathan.

Ms Rathie – who joined Bubs’s board in July 2021 – also criticised Ms Carr’s candidate for Bubs chair James Jackson, saying he, Mr Nathan and Ms Carr’s other nominee Rupert Soar have “little or no ASX-listed company director experience”.

This was despite Mr Jackson being the former deputy chair of agribusiness titan Elders. Mr Nathan has also received endorsement from one of Bubs’ biggest shareholders and customers, Chemist Warehouse chairman Jack Gance.

Ms Rathie said: “It appears as though Mr Jackson’s last ASX-listed company directorship was more than five years ago. The board considers that Mr Jackson does not offer any skills or experience that is not already found on the Bubs board.”

Mr Nathan is well regarded in the investment community for helping steer A2’s share price from 56c in April 2015 to a record high or $20 in mid 2020. But pandemic border closures sparked a collapse of the Chinese daigou or reseller trade and sent A2’s share price nosediving to $5 and the shareholder class actions.

Ms Rathie said Mr Nathan supported the daigou strategy, which Bubs is attempting to diversify away from, and “worked closely” with Chinese distributor AZ Global, which has also a Bubs shareholder and has joined Ms Carr and Mr Lin’s push to spill the board.

Ms Rathie said AZ Global’s subsidiaries Willis Trading and Alice Trading owed Bubs $5.5m and have “failed to repay the debts despite repeated demands from Bubs”.

Kristy Carr and Dennis Lin are leading a group of dissident shareholders, which own about 5 per cent of Bubs.

Ms Carr -- who says she not seeking an executive or board role as part of her spill push -- said Mr Nathan was the best choice to run Bubs, having steered A2’s China label strategy that has given the company access to China’s general retail trade, which represents about 80 per cent of the country’s infant formula market.

“Peter has a proven track record for growth in our sector,” Ms Carr said.

“His proposed appointment is designed to deliver a growth strategy which would return value for shareholders.”

Ms Rathie has appointed leading agribusiness investment banker David Williams and McGrathNicol to assist in a strategic review of Bubs’ operations.

Ms Rathie also said Ms Carr and Mr Lin were sacked from the company for “undisciplined expenditure” and preceding over “the long term decline in shareholder value”

“Since the company’s IPO on 3 January 2017 and during the tenure of Mr Dennis Lin and Ms Kristy Carr, the company has accumulated losses of $240m and raised capital seven times, with investors in each of those capital raisings suffering a material decline in the value of their investment, ranging from negative 59 per cent to negative 81 per cent.”

But Ms Carr said her ousting was “a complete shock”, which she said was the result of a “hostile takeover of the board” by interests associated with C2 Capital - a Alibaba-backed private equity firm which owns 10 per cent of Bubs.

“It wasn’t just a shock to myself or Dennis, it was a shock to many of our shareholders,” she said.

“Bubs shareholders should do nothing until they have heard from Save Our Bubs (campaign) on why the current inexperienced and deeply conflicted board should go and be replaced by our highly credentialed Dream Team who can deliver a growth strategy.”

Bubs shares closed down 5.3 per cent on Thursday, at 18c each.