IRELAND’S veteran corporate insider is facing what could be the biggest challenge of his decades-long career.
With activist investors launching an all-out attack this week on Aryzta, the Swiss-Irish bakery group where Gary McGann is chairman, the company has a battle on its hands that no-one will emerge from unscathed.
The investors – including Spain’s Cobas and Switzerland’s Veraison – want to oust McGann from the position he’s held since 2016.
While they want to leave chief executive Kevin Toland in his role, the boardroom cull planned by the investors would leave Aryzta – which has its roots in Irish agri group IAWS – devoid of any Irish directors.
If the investors get their way, Mr Toland would no longer have a seat at the board table, but be confined to his duties as CEO.
For McGann, who turns 70 later this year, it’s safe to say this is not the kind of boardroom assault he’d like to be dealing with in the sunset of his working life.
Asked at the Pendulum Summit in Dublin in early 2019 if he’d have taken on the challenge of trying to turn around troubled Aryzta if he knew how bad things were under the bonnet, he said he might have had second thoughts.
“I like a challenge, but I’m not a masochist,” he said. “I’d like to think I’d be ‘Braveheart’ and go in, but honestly, I don’t know.”
At an age where most would be thinking about a leisurely retirement, McGann might be wondering which set of knuckledusters he needs to take down from the shelf to defend himself from the investor uprising on Aryzta’s doorstep.
While the activist threat has been bubbling away at Aryzta for years, the company's board will now have to think carefully about its next moves.
The seasoned McGann will be able to draw on years of top roles at companies from Aer Lingus, Gilbeys, Green REIT and Paddy Power to Smurfit Kappa. He was also a non-executive director at the failed Anglo Irish Bank between 2004 and 2009. He’s currently the chairman of Paddy Power owner Flutter Entertainment and the chairman of Sicon, the firm behind building group Sisk.
Notwithstanding the current coronavirus pandemic that has played havoc with businesses across the world, some investors were already unhappy with the pace of the planned turnaround at Aryzta, which has bakeries in Europe and North America. Its customers include the likes of Subway and McDonald’s, while it also owns the Otis Spunkmeyer, La Brea and Cuisine de France brands.
In late 2018, Cobas opposed an €800m equity-raising plan by Artzta that was narrowly approved by the group’s shareholders.
Soon after, Cobas said they had placed too much trust in the embattled company’s management team.
"And as our confidence grew Aryzta's weight in the portfolio also grew," said Cobas portfolio manager Andres Allende in relation to the Spanish group’s position in Aryzta.
"Still, we made a different kind of mistake - not about the business or the balance sheet,” he told Cobas investors. “We were trusting too much in management, led by our prior good experience with the chairman."
"Then came the fall,” said Mr Allende, “which has been antifragile - that is, it didn´t really risk the fund thanks to diversification. And thanks to margin of safety we stand to perhaps recover much of our investment in it (not the cost of opportunity)."
Another Aryzta shareholder, London-headquartered J O Hambro Capital, has also signalled that it will back the activists.
“J O Hambro Capital Management Limited wants to state that it will independently support other shareholders' initiatives that protect and enhance shareholder value,” it said earlier this week.
Aryzta might circle the wagons, but it could find itself outgunned.
Shareholders owning 17.3pc of Cuisine de France owner Aryzta have requested an emergency general meeting of shareholders in order to unseat chairman Gary McGann and four other directors, including CEO Kevin Toland. The shareholders said the plan to remove Kevin Toland as director is in order to allow him to focus on his CEO role.