A feud between Topps Tiles and one of its major shareholders is continuing, with the tile specialist issuing an update ahead of its annual general meeting to be held on 18 January.
The Topps board of directors says it has become aware that MS Galleon GmbH (MSG) has been contacting certain Topps shareholders individually, with information that contradicts previous statements made directly to Topps around the link between sourcing and MSG’s equity interest in the company.
MSG owns Cersanit, a major European producer of tiles, in addition to having a range of home improvement and tile retailing interests, primarily in the Polish market.
Topps says that information provided to shareholders by MSG included a statement that it had recently discussed increasing its share of Topps’ product purchases to 5 per cent. However, this statement is, according to Topps, not an accurate representation of the entirety of those discussions and directly contradicts statements made by MSG to Topps.
The company added that MSG has, on a number of occasions, directly linked the level of its equity holding in the company with the level of supply that it wishes Topps to source from Cersanit. To this end it was requested as recently as November 2022 that Topps should source 29.9% of its tile purchases from Cersanit in line with MSG’s shareholding in Topps.
Moreover, Topps says Cersanit, as a supplier, is uncompetitive when compared with other manufacturers of similar products, while Topps’ sourcing policy does not allow for more than 10% of tile purchases to come from any one supplier in order to avoid concentration risk.
In addition to a potential conflict of interest around sourcing, the Board believes MSG may also be preparing to launch its Nexterio tile retail brand in the UK, potentially establishing a direct competitor to Topps, which would create a further material conflict of interest.
In December MSG pushed for the firm to remove a director of the company from office, as well as eject him from the position of non-executive chairman. It was proposed that Darren Shapland be replaced, while Lidia Wolfinger and Michael Bartusiak (both employees of companies owned by MSG) be appointed as non-executive directors of the company.
The Board however does not consider the proposals to be in the best interests of the Leicester-based company and its shareholders, intending to recommend that shareholders vote against the Requisitioned Resolutions at the business’s AGM.
The Board believes that the proposed appointment of MSG’s non-executive directors has the primary objective of aligning Topps’ business and strategy to MSG’s commercial objectives as owner of Cersanit, a manufacturer of tiles, and is therefore not in the best interests of the company and Topps’ shareholders as a whole.
The Board believes it is incompatible for the proposed non-executive directors to have the target of increasing tile purchases from Cersanit to 29.9 per cent., whilst at the same time acting in the best interests of all shareholders of Topps.
Meanwhile Topps has now secured further support from key shareholders for the Board’s position. Over 41% of Topps’ shareholders have now confirmed intentions to vote against the Requisitioned Resolutions.
Darren Shapland, non-executive chairman of Topps, said: “The Board continues to believe that these proposals would expose shareholders to a number of serious conflicts of interest and are not therefore in the interests of all shareholders of the company. The Board welcomes the strong support received from other large shareholders who support the Board’s position in voting against the Requisitioned Resolutions at the AGM.”
Keith Down, senior independent director of Topps, said: “The Board has unanimously rejected these resolutions which it does not believe are in the best interests of the Company and its shareholders as a whole. MSG is attempting to remove the chairman, who has been leading communications with MSG on behalf of the Board, to allow it to increase its control over the business.”
