The Murray River Group board says it’s trying to save the company from a takeover-by-stealth, and have explicitly accused the departed founders of having hampered the performance of the business.

Two minority shareholders, BLBD and Meredith Nominees, have called a meeting to replace the three directors with their own people.

But the board, led by chairman Craig Farrow, unanimously recommend that shareholders vote against all resolutions proposed by BLBD and Meredith Nominees.

In a letter to shareholders, which has been publicly released as an ASX announcement along with a notice of extraordinary general meeting, Mr Farrow said the people behind this move are actually founders Erling Sorensen and Jamie Nemtsas.

“Your board is concerned that the proposed resolutions are prompted by an attempt by former management, whom your board considers primarily responsible for your company’s poor performance, to re-exert their influence over your company and gain control without making a formal takeover offer,” the letter told shareholders.

“In August 2017, Mr Nemtsas resigned as chief operating officer, and in November 2017 Mr Sorensen resigned as managing director and CEO.

“Their resignations were tendered in the context of poor performance, including operational and reporting errors that ultimately caused a $13 million cash impact to your company, a $6.1 million inventory write-down, and led to your company having to issue an unexpected earnings downgrade in May and raise extra capital in August to strengthen its financial position.”

The letter said the board is currently undertaking an external independent investigation “into practices and behaviours that led to the inventory write-downs, operational challenges and reporting deficiencies”.

It says 16 per cent shareholder Thorney Investment Management is not only voting against the resolutions, but if they succeed will call anther meeting to try to overturn them.

Board has seen these ideas before
The letter says the proposals from the two minority shareholders are similar to those presented by Jamie Nemtsas in October.

BLBD and Meredith Nominees have proposed appointing Mr Nemtsas, Andrew Monk and Steven Si, among others, to the board, re-appointing Mr Nemtsas as COO and acting CEO, and consider the purchase or merger of Mr Si’s company Kadac.

Mr Si also controls SHWL, which last week lifted its stake in Murray River to 11.6 per cent.

BLBD and Meredith Nominees are controlled by Bryan Meredith, a major early investor in the Murray River business, and own about 5 per cent. All three entities have been building positions since at least October.

At the AGM, both founders, Meredith, BLBD and SHWL voted as a unit, defeating all but one of the resolutions.

The minority shareholders want to replace Mr Farrow, Lisa Hennessy and Kenneth Carr with Andrew Monk, Steven Si and Keith Mentiplay.

Mr Farrow’s letter said the current board has concerns that Mr Si and Mr Monk may not be independent directors, if they are appointed.

Where Mr Si is allegedly associated with the rebel voting block, the current board’s objection to Mr Monk is that he is the chair of the Australian Certified Organics, the organisation that provides Murray River with its organics certifications.

Murray River shares dropped almost 4 per cent on Monday morning, to 40.5c.