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Cray Group Members Are Attempting to Interfere With the Board's Fiduciary Duties
MGP Stockholders Urged to Vote the WHITE Proxy Card Today
ATCHISON, Kan., Aug. 7, 2013 (GLOBE NEWSWIRE) -- The Independent Directors of MGP Ingredients, Inc. (Nasdaq:MGPI) (the "Company") today issued an open letter to stockholders outlining a series of important facts that MGP stockholders must know before casting their votes ahead of the 2013 Annual Meeting. We encourage stockholders to review the facts outlined below, which underscore the significant risks of allowing the Cray Group to turn MGP back into a quasi-private, family-run business. Protect the value of your investment in MGP by voting the WHITE proxy card today.
Dear Fellow MGP Stockholder:
Cray Group Members Are Attempting to Interfere with the Board's Fiduciary Duties. As directors of MGP, we take our fiduciary duties very seriously, and we know that common stockholders expect that we will explore any alternative that could maximize value for them, regardless of whether that is through the execution of the current growth plan, a merger, sale of the Company or a business unit, a recapitalization or another strategic alternative. Stockholders should demand nothing less of their directors. We are working quickly and diligently to explore alternatives and have received interest from public and private third parties as a result of these efforts.
Cray Group members Karen Seaberg and Bud Cray, who are also MGP directors, have made it clear that they will
not consider potential strategic alternatives to maximize MGP's value – no matter how attractive those alternatives may be for other stockholders. This is a blatant effort to prevent the Board from carrying out its fiduciary duties and does not serve the best interests of
In an August 1, 2013 court filing attempting to block the Special Committee's ongoing process of reviewing alternatives, the Cray Group said: "... Plaintiffs (Karen Seaberg and Bud Cray) are opposed to an active shopping of the Ingredients or other divisions of the Company for sale at this time… Plaintiffs have also made it clear to MGP that they have no interest in selling their holdings of MGP stock at the present time, so any strategic alternative under consideration by MGP will not involve Plaintiffs or their family counterparties.1"
The Cray Group's opposition to a strategic review apparently doesn't come from an interest in stockholder value but simply reflects the fact that "We felt like we had to save what we built… 2". Their entrenched approach to MGP is in direct conflict with their duties as directors.
Stockholders should seriously question what the Cray Group's actions will actually save. The Independent Directors and the management team are working to drive value. Stockholders must consider whether they want to give the Cray Group, which already controls five of nine director seats and seems to be more focused on their own interests rather than on those of
all stockholders, even more control to turn MGP into their own quasi-private company.
Cray Group's Flawed Strategy and Analysis Underscore the Need for Independent Leadership. The Cray family's prior strategy when they led MGP and the Cray Group's current flawed analysis underscore the need to keep professional, experienced and independent leadership at MGP.
Between 1985 and 2007 under Cray family leadership, even as a commodity-driven, sub-scale competitor, MGP paid out nearly one-third of its net income in the form of common dividends. As the owner of 27.5% of the common stock, this unusual cash management approach benefitted the Cray family immensely. However, it also starved the business of important capital to secure MGP's long-term success, such as investments in MGP's physical plant, technology and employees.
We believe the Cray Group has made numerous misleading and inaccurate statements that raise doubts about their understanding of MGP and its ongoing transformation.
In an August 1, 2013 Securities and Exchange Commission filing, the Cray Group described MGP's peer group as including Krispy Kreme Doughnuts, McDonald's, and Pepsico. While it might be flattering to try to make that comparison, any serious business person knows that these companies have little-to-nothing in common with MGP based on their size, market segments and business mix.
And in the their August 6, 2013 open letter to stockholders, the Cray Group reveals their lack of knowledge about MGP and the premium spirits market by praising MGP's Lawrenceburg Distillery as being the "birthplace of the Four Roses brand…a product that was at one time the number one selling American whiskey in Europe as well as Japan." Though Four Roses is a great brand with a proud history, it's in fact owned by the Japanese company, Kirin, and crafted in Lawrenceburg, Kentucky, over 100 miles away from MGP's Lawrenceburg, Indiana distillery.
The Cray Group has no plan other than to replace MGP's CEO while the Company is in the midst of a critical transformation – a transformation that the Cray Group's Board representatives claim to support. The Cray Group naively asserts that "other executives of the Company can oversee execution of the strategic plan" as they run a search for a new CEO. It's just not that simple. We believe a management change now is not only unwarranted, but would place MGP's progress at significant risk.
Don't Let the Cray Group Derail MGP's Progress and Value Opportunity. We and MGP's management team have taken aggressive actions to reposition the business for profitable growth, including exiting the fuel alcohol market, entering critical supply agreements with ConAgra and Bunge, divesting underperforming assets and investing in high-value growth opportunities such as the acquisition of the whiskey and bourbon distillery in Lawrenceburg.
These crucial changes, begun in 2008, enabled the Company to withstand the extreme commodity volatility in 2011 and 2012. If the Company had still been operating under the antiquated systems from the Cray regime, we believe MGP would have suffered significant operating losses that could have crippled the Company.