Cal-Maine Foods Crafts Agreement To Buy Out Founder’s Family

Cal-Maine Foods, the country’s largest egg distributor, has an agreement with members of the family of its founder, Fred R. Adams Jr., to potentially convert all of their super voting Class A shares into common shares. If executed, it would reduce their voting power from 53.2% to 12.0%.

Coincidentally, Cal-Maine also announced a share repurchase program of up to $500 million. “The company expects to strategically and opportunistically repurchase shares from time to time in the open market, subject to market conditions and other factors,” the announcement said, although “It is also possible that the company could use a portion of its new share repurchase program to repurchase some of the family members’ common shares.”

The company also granted rights to the family members to allow them to sell their common shares in the open market.

The potential diversification could result in Cal-Maine ceasing to be a “controlled company,” according to the rules of The Nasdaq Stock Market. “The timing and manner of these potential diversification transactions have not been decided,” the company said. “The board of directors has taken … steps … to position the company for the potential loss of controlled company status.”

Stock-holding members of the Adams family, incorporated as Daughters’ LLC, have advised the company they are potentially interested in selling all or a portion of their stock. They indicated they are willing to work with the company toward achieving a smooth transition.

Cal-Maine said the conversion to a single class of stock would broaden the appeal of the company’s shares to investors, “many of which prefer single voting class common stock structures.” The actions also will mean a restated charter and structural changes to the board of directors and its committees.