The Beston Global Foods has avoided a board spill after yet another protest vote

Beston Global Food Company chair Roger Sexton has blamed the company’s major Chinese shareholders for a fourth strike vote in as many years.

Dr Roger Sexton is chairman of Beston Global Food Company.

Beston Global Food Company chair Roger Sexton has blamed “recalcitrant shareholders’’ and singled out the company’s Chinese investors as the food producer notched up its fourth strike vote on the trot at Friday’s annual meeting.

The company received strong protest votes against all of the seven resolutions put to the meeting, and failed to pass two resolutions relating to its ability to raise new capital without going back to shareholders for a vote.

The re-election of director Stephen Gerlach - a former Santos chairman - received only 62.3 per cent support, and the remuneration report attracted a 44.3 per cent vote against, where 25 per cent constitutes a “strike” under Australian corporate law.

A subsequent vote to spill the board was narrowly voted down, with 56.7 per cent of shares voted against the resolution.

It is the second time the Beston board has faced a spill vote in the past four years, and in every one of those years, it has attracted a strong protest vote, and hence a “strike”.

A spill vote is called when a company receives two strikes in a row, however the process resets after each spill vote.

At last year’s meeting the protest vote against the remuneration report was 50.84 per cent and in 2019 it was 64.9 per cent.

READ MORE:Beston pleads with shareholders not to spill the board

Dr Sexton said the company’s Chinese shareholders, which Beston has fallen out with, were the main agitators to remove the board.

“Those of you who have been coming to AGMs for a while would know that we have some recalcitrant shareholders that have brought on this resolution previously,’’ he told the meeting when the spill resolution was being discussed.

“And it’s worth noting that over 85 per cent of the proxy votes voted in favour of the spill motion at this meeting were shareholders based in China.’’

Beston has had a falling out with major China-based shareholders Kunteng and Australia Aulong Auniu Wang Food Holdings who have been on the register since the company listed in 2015.

Beston says both failed to follow through with agreements to buy products and help open up the Chinese market for the South Australian cheese producer.

Both Chinese companies have in past made their own plays for board seats.

Beston has failed to make a profit since listing, however chief executive Fabrizio Jorge told the meeting the company had had a “very, very strong” start to the financial year with sales up 49 per cent to $46.6m.

He also said $14.3m in unsold lactoferrin from the last financial year would be sold this year.

Beston is in the midst of a major capital raising, which will bring in $28.3m in total once the institutional component of the raise hits the register.

This compares with the company’s current market capitalisation of $27.95m.

The raise will significantly alter the balance of power among the company’s major shareholders, with Regal Funds Management underwriting the issue to the tune of $15m, while also agreeing to scale back its holding to the 19.9 per cent cap over which a takeover must be lodged.

Allianz has also committed to participate in the raise and will not go higher than a 9.5 per cent stake.

The money is being raised at 2.5c per share, a steep 59.6 per cent discount to the company’s previous share price, however as Dr Sexton told the meeting, Beston was forced into the move by the NAB which demand $16m of the $48m in debt it was owed be paid back by the end of this calendar year.

One shareholder asked why the company was raising so much money so cheaply when Beston had $14.3m in lactoferrin it had effectively pre-sold, with Dr Sexton explaining the company needed the funds quickly due to the NAB’s demand.

In response to a shareholder question, Dr Sexton said his stake in the company was about 5 per cent.

Beston is forecasting pre-tax earnings of $8m-$10m this financial year on sales of $150m-$180m, which would be an 18 per cent increase.

Two resolutions relating to the company’s ability to issue new shares without a shareholder vote were voted down at the meeting, meaning Beston will now have to put any new capital raises to a shareholder vote in the current financial year.

Dr Sexton said in response to a question that the company had no need to raise capital “at all” from now on given its projected positive cash flow.

Beston last year posted a net loss of $21.72m, almost identical to the previous year’s result, however did grow revenues from $112.5m to $139.8m.

The company failed to provide a live stream of the meeting for shareholders despite flagging in the notice of meeting that one would be provided.

Beston shares were unchanged on 2.8c.

Originally published as The Beston Global Foods has avoided a board spill after yet another protest vote