September 4, 2008 / 7:03 PM / 11 years ago

SunOpta launches review, proposes rights plan

(Figures in U.S. dollars unless noted)

OTTAWA, Sept 4 (Reuters) - Canadian organic food distributor SunOpta Inc (SOY.TO) has launched a strategic review as its stock languishes and is proposing a shareholder rights plan to prevent an unfair takeover.

“Despite record revenue and strong internal growth and operating performance, the company’s shares trade at a discount to its historical valuation benchmarks,” board chairman Jeremy Kendell said in a statement on Thursday.

In the wake of a damaging earnings warning, shares in the one-time market darling have slipped 42 percent so far this year. The stock was unchanged at C$7.44 in Toronto and down 11 cents at $6.94 on Nasdaq on Thursday.

Headquartered in a farmhouse near Toronto, SunOpta said it has hired Genuity Capital to identify alternatives to improve shareholder value.

As part of its strategic review, the company will study its capital structure, business plan and growth strategy, and consider selling non-core businesses or assets.

SunOpta, which also has a bioprocessing unit and a minerals division, forecasts 2008 revenue of more than $1 billion and net profit of 25 cents to 30 cents a share, before costs associated with an independent investigation and legal expenses.

It does not appear SunOpta is using the term strategic review as typical corporate code for companies seeking buyers at a higher price, said Octagon Group analyst Robert Gibson. The review of non-core assets suggests it is not hanging out a for sale sign, he wrote.

SunOpta said it has not received any takeover offers, but a shareholder rights plan would give it time to develop alternatives in the face of a hostile bid. Shareholders will vote on a rights plan at the company’s annual meeting.

SunOpta’s woes began in late January, when it warned that big writedowns would hurt earnings. It announced a writedown of $11 million for over-valued berry inventory and a $3 million provision for a legal dispute in its bioprocess business.

SunOpta is investigating the inventory issue and recently said it would replace its top two executives by year-end. It faces a string of lawsuits in Canada and the United States related to its earnings warning. ($1=$1.06 Canadian) (Reporting by Susan Taylor; editing by Rob Wilson)

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