On February 25, Cal-Maine Foods, one of America’s leading egg producers, announced a significant governance change. The company disclosed that its founding family will primarily relinquish its voting power while maintaining its economic interest.
The Mississippi-based firm revealed that it signed a conversion agreement with Daughters’ LLC (DLNL), a vehicle encompassing the four daughters of company founder Fred R. Adams Jr.
Adolphus Baker, Cal-Maine’s board chair and Adams’ son-in-law, also plays a role within DLNL, which currently holds all 4.8 million Class A shares and 1.1 million common shares of the company.
This agreement may facilitate the conversion of the family’s super-voting Class A shares into common stock, as indicated in a company statement.
Such a change would initiate a new governance structure at Cal-Maine and potentially diversify the family’s financial interests.
Currently, Class A shares in Cal-Maine grant ten votes per share, in contrast to one vote per common share.
If all Class A shares are converted, Cal-Maine Foods will consist of a single class of stock, with each share carrying one vote.
According to the company, while converting the shares into common stock would preserve the controlling stockholder’s 12% economic interest in Cal-Maine, their voting power would decrease from 53.2% to 12%.
This process aims to simplify the company’s equity capital structure and enhance its appeal to a broader range of investors by eliminating dual-class shares.
Commenting on the new agreement, Baker stated: “The decisions to consider diversifying our family’s individual financial portfolios are personal decisions made in connection with our own respective financial and estate planning efforts.”
Baker also mentioned that the board has requested him to “remain as executive board chair at least until the company’s 2027 annual meeting of stockholders.” He expressed enthusiasm about collaborating with the board and management to continue executing the company’s strategy successfully.
Moreover, the company’s board has approved amendments to its charter and bylaws to align with the forthcoming governance structure.
Additionally, the board will establish a nominating and corporate governance committee and appoint a lead independent director as these governance changes take effect.
In preparation for these potential changes, Cal-Maine’s board of directors has approved a substantial $500 million share repurchase program.
Cal-Maine Foods president and CEO Sherman Miller commented: “Our share repurchase program underscores our continued confidence in the strength of our business and future cash flow generation, as well as our commitment to returning capital to our valued shareholders. The share repurchase program provides us with another tool to achieve that objective.”
Headquartered in Ridgeland, Mississippi, Cal-Maine markets eggs across a significant portion of the United States.
Earlier in October, Cal-Maine announced plans to invest $40 million in new capital projects to enhance cage-free egg production.
