Murray River’s past comes back to haunt as founders return
Murray River Organics founders Jamie Nemstas and Erling Sorenson are trying to roll the dried fruit producer’s board — again.
The pair tried and succeeded in January in rolling the entire board and now they want to replace two directors — one of which they actually chose — with themselves.
They say they have the backing of investors holding 30 per cent of the register, and have an alternative to the vision Murray River has painstakingly outlined over the past few months.
They also want to cancel a $30.6m capital raising designed to provide desperately needed cash for the struggling fruit grower, and 25.8m incentive options for the CEO, directors, and a corporate advisor.
They claim the 10c a share raising is too cheap, compared to the 31c it traded at in May just before being suspended to sort out its funding problems.
They’re proposing instead a $5m unsecured line of credit.
Even though both men, via shareholdings in their wives’ names, sold down heavily to a joint 8.89 per cent holding after winning in January, they still own enough of Murray River Group (ASX:MRG) to upset the new CEO’s turnaround strategy.
They were forced to outline the nature of their association and the size of their shareholding on Monday via a substantial shareholder notice.
This feels familiar….
Current board members Andrew Monk and Keith Mentiplay were in the attacking trenches in January alongside the founders.
Now they’re having to fall back on the same bloody tactics their predecessors used to try to stave off the previous attack.
The two founders caused havoc at last year’s AGM after being kicked off the board, following a series of harvest and profit downgrades.
Murray River has been in turmoil since early 2017 when the founders Erling Sorenson and Jamie Nemtsas — who were pushed out — were forced to concede the summer harvest was significantly damaged by storms.
The board, then led by Craig Farrow, accused Mr Sorenson and Mr Nemstas of trying to takeover the company by stealth.
Then in January it released an external investigation alleging “poor practices relating to weighing of product at the Mildura operations overseen by senior management”, such as not weighing each fruit bin.
In a tense letter to shareholders, published on the ASX, the current Murray River board reminded investors of that investigation as well as their now view that Mr Sorenson and Mr Nemstas aren’t exactly director material.
“It is… with reluctance that we further disclose that the external independent investigation conducted by KordaMentha into business and operational practice and employee behaviours (as previously announced) contains serious allegations against certain members of the former management of the company, which includes the founders,” the board said in a letter published on the ASX.
“This investigation has been handed over to the relevant authorities. The directors cannot in good conscience recommend that the founders be reinstated to the board in the context of the findings of the external independent investigation.”
“The board considers that the original founders, who both left the company in 2017 following significant downgrades and loss of shareholder value, have been at the centre of the underlying problems and poor management of the company which resulted in its under-capitalisation.
“The board views the requisition request attached as a blatant attempt to thwart the opportunity for the company to reset its balance sheet and that it is misleading in its suggestions that there are alternatives to the capital raising capable of delivering a superior return to shareholders.
The board says the $5m line of credit alternative would not only need the bank’s consent, but wouldn’t cover the $26.1m worth of debt that is due at end of November.