Tile retailer Topps Tiles Plc has secured further support from shareholders against proposed plans to oust the firm’s chairman, Darren Shapland, as well as issuing a warning over contradictory information shared.
Served as a Requisition Notice, on 6 December 2022, by Lynchwood Nominees, on behalf of MS Galleon – which owns a 29.9% stake in the company, the proposal plans to replace Darren Shapland, Topps’ non-executive chairman and director of the company, while installing Lidia Wolfinger and Michael Bartusiak as non-executive directors.
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.
Now, Topps said it has become aware that MSG has been contacting certain Topps shareholders individually, with information which contradicts previous statements made directly to Topps around the link between sourcing and MSG’s equity interest in the company.
Information provided to shareholders by MSG included a statement that it had recently discussed increasing its share of Topps’ product purchases to 5%.
“This statement is not an accurate representation of the entirety of those discussions and directly contradicts statements made by MSG to Topps. 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, one of the proposed directors, Lidia Wolfinger, requested as recently as 25 November 2022 that Topps should source 29.9 per cent. of its tile purchases from Cersanit in line with MSG’s shareholding in Topps, with interim stage gates for achieving a 5 per cent. and then 10 per cent. share over the short term,” a statement said.
Topps said that all sourcing should be “conducted on an arms-length commercial basis” after a review concluded that as a supplier it is uncompetitive when compared with other manufacturers of similar products.
“Topps and the Board believes strongly that becoming overly reliant on a single supplier is not in the best interests of the Company and its shareholders as a whole. Topps’ sourcing policy does not allow for more than 10 per cent. of tile purchases to come from any one supplier in order to avoid concentration risk,” Topps said. “The Board has tried to engage constructively with MSG but in its interactions with Topps, MSG has made it clear on a number of occasions that it believes that the size of its shareholding entitles it to expect the Company’s management and the Board to comply with its requests. The Board sees no linkage between a minority equity stake and control of the Company and believes lack of compliance with MSG’s requests led to MSG voting against Darren Shapland’s re-election at the 2022 annual general meeting and that this is also driving the proposal to remove Darren from the Board as well as the proposed appointment of two new directors representing MSG in 2023.”
In addition, Topps has reason to believe MSG may also be preparing to launch its Nexterio tile retail brand in the UK, potentially establishing a direct competitor to Topps. The statement continued: “MSG owns Nexterio, a retailer of tiles and associated products with over 40 outlets in Poland, which the Board understands is being prepared for a launch into the UK. A new company, Nexterio.UK Limited was incorporated on 22 November 2022, the website www.nexterio.co.uk has been registered and the Board understands a search for suitable trading locations around the UK is underway. Nexterio would be a direct competitor to Topps, and the Board believes that the appointment of non-executive directors onto the Board who represent a direct competitor would be a further conflict of interest and would not be in the interests of all shareholders of Topps.”
Topps added that it has secured further support from key shareholders, with over 41% of Topps’ shareholders have now committed 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.”
Topps will hold its AGM on 18 January 2023.