Friday, June 28, 2013
MGP of Indiana May Be Sold...Again
Steve Watkins, in the Cincinnati Business Courier, reports that "a battle is brewing involving the whiskey distillery in Lawrenceburg." He's referring to MGP of Indiana, the former Seagram's distillery that distills and ages the whiskey for Templeton rye, Old Scout bourbon and rye, Redemption bourbon and rye, Bulleit rye, George Dickel rye, and other bourbon and rye brands too numerous to mention.
The facility is actually two distilleries. The larger one makes neutral spirits and gin, the smaller one makes whiskey.
Seems that last week the parent company, MGP Ingredients, based in Atchison, Kansas, announced that its 2013 Annual Meeting has been postponed indefinitely because of a proxy fight initiated by a voting trust that controls 75 percent of the company's voting shares.
The dissident shareholders have filed a proxy statement with a competing slate of directors. They want a new CEO too. In late May, the MGP board appointed a committee of six independent directors to "review strategic alternatives," including sale of the Lawrenceburg distillery the company acquired in October of 2011.
The dissidents are led by members of the Cray family, who own a lot of MGP stock through various family-run entities. They are all descendants of Cloud L. Cray, who founded MGP in 1941. In their proxy statement, they expressed "growing concern with the lack of profitable growth, deterioration in the corporate culture, efforts to sell certain parts of the Company’s business, efforts to amend the bylaws that would limit accountability to shareholders and increase the power of the Chief Executive Officer (“CEO”), and the level of compensation paid to the Chairman of the board of directors and the CEO of the Company."
None of this appears to be directly aimed at MGP of Indiana, except that Lawrenceburg has been positioned by the current regime as the cornerstone of its effort to get the company back on track, a course which the dissidents oppose.
The distillery has 19th century roots but was acquired by Seagram's near the end of Prohibition and completely rebuilt thereafter. About ten years ago, when Seagram's was acquired and dismantled by the tag team of Diageo and Pernod-Ricard, Lawrenceburg went to Pernod. A few years later, Pernod announced it would sell the plant if it could or close it if no buyer was found. Angostura bought it. When the worldwide economy went into crisis in 2008, Angostura's parent company, CL Financial, collapsed and had to be rescued by the government of Trinidad and Tobago, where it is based. In the restructuring that followed, ownership of Lawrenceburg, as well as the mothballed Charles Medley Distillery in Owensboro, Kentucky, was transferred away from Angostura to another arm of CL, which found a buyer for Lawrenceburg in MGP. The sale price was $15 million.
MGP mostly makes neutral spirits, starch, protein, and other products from corn and other grains. It hoped to move into a higher value commodity business with the Lawrenceburg acquisition, a strategy the dissidents apparently oppose.
Since Lawrenceburg is the only major distillery that exclusively makes whiskey for non-distiller producers (NDPs), it is highly valued by that segment of the whiskey industry. It recently expanded its portfolio of whiskey recipes from five to eleven and has ramped up production.