NEW YORK ( The Deal) -- Mutual fund Wintergreen Advisers LLC stepped up its 10-month-old activist campaign at Coca-Cola ( KO) on Monday, raising concerns about the soda giant's "failed" acquisitions, "bad" compensation plans and weak governance.
The insurgent, which has 0.06% stake in the company and is managed by David Winters, has called for the replacement of Coca-Cola CEO Muhtar Kent. He has outlined a series of recommendations intended to boost the company's stock price and ensure that the company's "50-year record" of dividends stay in place. The activist fund said payments for Coke's top executives has been excessive "in light of the company's performance," adding that the cola company has "routinely been outspending its cash flow in recent years and funding the gap with debt."
Winters, who launched his "deep value" Mountain Lakes N.J.-based fund in 2005, has issued over a dozen press releases raising concerns about Atlanta-based Coca-Cola, the first of which was in March where he expressed disappointment with Coca-Cola's equity plan.
The fund is not a complete stranger to activism: In 2009 and 2010 it launched a campaign at Consolidated-Tomoka Land ( CTO) that included a proxy fight. According to FactSet, the proxy fight was settled in 2010 when the company agreed to nominate the dissident nominee and recommend that shareholders vote in favor of the dissident proposals to adopt a majority vote standard in director elections and approve a "say on pay" proposal. Winters had previously worked for high profile value investor Michael Price.
Winters' campaign at Coca-Cola began with an effort earlier this year to press the company to change its executive compensation plan that he considered dilutive to shareholders. Winters wrote to Warren Buffett, a large Coke shareholder, and the Coke board raising the concern. In October, under pressure from institutional investors, Coke changed its pay plan in a move that Winters said was "outrageously excessive and inconsistent" with past plans. "Much more work has to be done to revitalize Coca-Cola and restore trust in the company," Winters said in October.
Institutional Shareholder Services' Quickscore report, obtained by The Deal, suggests that Coca Cola has some pay issues, including that the company grants stock awards but discloses that it only has a 12-month holding period for them. In addition, 25% of share capital is necessary to convene a special meeting. Activists often seek special meetings to launch proxy contests and press for other changes, ISS said in the report.
Coca Cola said, in an e-mailed statement, "We utterly reject David Winters' claims." The company said Kent had "outlined meaningful strategic plans to accelerate sustainable and profitable growth and deliver long-term value to our shareowners."
In October, reports emerged that Berkshire Hathaway Inc., the Omaha, Nebraska-based company owned by Buffett and 3G Capital, a Brazilian firm owned by three billionaires, could buy Coke for $258 billion. The Brazilian firm controls Anheuser Busch InBev and they worked together with Buffett to acquire H.J. Heinz Co.