McCain Foods is one of the country’s most successful exports.MARTIN BUREAU/AFP/Getty Images
The founders of McCain Foods Ltd., the world’s biggest French fry producer, did everything right when it comes to succession.
After a bitter battle for control between co-founders Wallace and Harrison McCain in the early 1990s, the New Brunswick-born business with global reach recruited top outside managers and adopted a two-tier board that checks all the boxes on governance.
For all this work, McCain Foods finds itself caught in a second family feud. Eleanor McCain, the 56-year-old daughter of co-founder Wallace McCain, wants to cash out her inheritance and is at odds with her relatives over the value of her stake in one of the country’s largest private companies.
One path forward for the McCain clan is an initial public offering that would give investors a chance to own one of the country’s few global champions.
Second-generation McCain family feud rocks multibillion-dollar French fry empire
Successful succession at numerous other family-controlled Canadian companies – Power Corp. of Canada, Loblaw owner George Weston Ltd., Thomson Reuters Corp. and Saputo Inc. – shows taking McCain Foods public may be the best way to ensure the next generation continues to benefit from owning a global champion.
While Eleanor McCain and her relatives are attempting to keep their disagreement private, the family did say something revealing about the balancing act that comes when a family business gets to the third and fourth generation.
In a statement last Friday, a spokesperson for the holding company that owns McCain Foods said the family is trying to treat all shareholders fairly “with a view to balancing the interests of all stakeholders and the long-term interests of the company.”
The family can argue – and probably is arguing – that an exit for Ms. McCain that leaves the holding company deeply in debt fails to balance the interests of all stakeholders.
McCain Foods is one of the country’s most successful exports. Chief executive officer Max Koeune has more than doubled sales since assuming the top job in 2017, while burnishing the brand by embracing sustainable agriculture. Success at a company that sells its products in 160 countries creates a challenge when a significant shareholder wants to cash out.
McCain Foods is private but does disclose it sold $16-billion of frozen potatoes, Pizza Pockets and Deep’n Delicious cakes last year. Its largest competitor in North America is publicly traded Lamb Weston Holdings Inc. The Idaho-based potato producer is valued at 1.9 times annual revenues.
Give the same multiple to McCain Foods and Ms. McCain owns a significant stake in a business valued at $30-billion. Ms. McCain’s stake could easily be worth more than $1-billion.
An IPO would allow the founder’s daughter to gracefully exit without burdening her extended family.
Going public, while maintaining family control, brings its own challenges and costs. However, Canadian public companies run by a family have a track record for outperforming peers, according to studies from National Bank of Canada.
There has been a dearth of IPOs in Canada in recent years, in part because capital providers such as pension plans and private equity funds have attractive alternatives to public markets.
Getting ownership right at family businesses is essential to building a strong economy. Across the country, family-controlled companies account for 47 per cent of private-sector jobs and 49 per cent of the private sector’s gross domestic product, according to the Conference Board of Canada. Public markets should be a growth option for some of these companies.
The sheer scale of McCain Foods, plus the family’s desire to remain the controlling shareholders, make an IPO a more attractive option than bringing in an institutional investor that would demand input into operations.
If an IPO turns out to be part of the McCain family’s solution to their ownership issues, the knock-on effect could be spectacular. The McCains’ New Brunswick neighbours, the Irving family, British Columbia’s Jimmy Pattison and Manitoba’s Richardson family all face similar issues as ownership of their companies moves to the next generation.
The same challenges face food industry upstarts with global ambitions to match the McCains, such as fish producer Cooke Inc. and baker FGF Brands, which made the muffin you enjoyed with your Starbucks coffee this morning.
Properly priced, an IPO from McCain Foods could give public markets a much-needed boost, help a global champion become an even stronger player and solve a family feud.