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Legion Proposes Primo Water Declassify Board

By Gregory Morcroft

Activist fund Legion Partners Asset Management LLC on Oct. 29 escalated its complaints against target Primo Water Corp. (PRMW) and founder Billy Prim and threatened a potential proxy fight at next year’s annual meeting.

It also submitted a proposal to be included on the company’s proxy card calling on it to declassify its board and elect all directors annually.

People familiar with the situation said Legion was filing its proposal now because the deadline to submit proposals for the 2020 annual meeting is Nov. 28. That way, if Legion did not file a director slate later, the activist’s board proposal would be before shareholders via the company’s proxy card.

The deadline to nominate directors for Primo’s 2020 annual meeting is Feb. 2.

Prim founded Primo Water in 2004 and has served on the board of directors since inception and as executive chairman since June 2017. Previously, Prim was the company’s chairman and CEO.

“Legion Partners is convinced the company is in need of multiple new directors, including a new independent chairman, in order to remove conflicts of interest and increase management accountability for repeated downward revisions to guidance due to poor operational execution.”

The activist complained that since it contacted the North American provider of water dispensers on Sept. 17 and encouraged it to eliminate its executive chairman post, the board has made no effort to meaningfully engage with Legion or take steps to enhance management accountability and transparency.

Explicitly, Legion, which owns 9.1% of Primo, expressed concern about what it described as conflicts of interest in identifying directors Malcolm McQuilkin, Richard Brenner and David Warnock as independent, claiming they are tied to Prim through another company he founded, propane provider Blue Rhino.

According to The Deal’s sister publication, relationship tracking site Boardex, McQuilken has almost nine years’ tenure on Primo’s board, while he’s also Blue Rhino’s president and has been for almost 20 years. Boardex also reveals that Brenner spent six years on Blue Rhino’s board from 1998 through 2004. He’s served as a Primo director for nine years.

According to Boardex, Warnock also has ties to Prim through Blue Rhino, where he served as a director from 2000 until 2004. The executive relationship site also shows that Warnock looks overboarded, with more than half a dozen directorship commitments across public and private entities.

Primo fought back against Legion’s broadside late on Oct. 29, rejecting the activist’s claims and asserting it’s had several meetings over the past 18 months with Legion regarding its board and soliciting input from it and other shareholders. “Several of our shareholders have already provided us with constructive feedback on these matters. Legion has yet to do so, but we continue to welcome Legion’s input.”

Primo has a market capitalization of $649 million. It is scheduled to report financial results on Nov. 5.