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Bubs shareholders grow concerned about chair exit, status of CEOCarrie LaFrenzSenior reporterApr 19, 2023 – 6.25pmSaveShareOne of the largest shareholders in Bubs Australia says the treatment of the company’s chief executive and former executive chairman is “wrong”, accusing the infant formula manufacturer of keeping investors in the dark.Anthony Gualdi co-founded Bubs with Kristy Carr, the company’s CEO, nearly two decades ago and made the comments after it forced Dennis Lin from his position as executive chairman. Ms Carr has also taken personal leave following a dispute with the board over the treatment of Mr Lin.Kristy Carr and chairman Dennis Lin with boxes of baby formula bound for the US last year. Getty“I do not support what has happened. Kristy and Dennis – in particular Kristy has dedicated 18 years of her life – since we founded the company,” Mr Gualdi said. “The process and the way in which it was done is wrong.”Ms Carr’s leave has led to heightened speculation within the company and among investors that she too will depart, and that tensions have escalated to the point that she has been asked not to communicate with staff.A spokesman for the company said on Wednesday that no communications restrictions had been placed on Ms Carr. Bubs chief operating officer Richard Paine is running the company in her absence.Katrina Rathie has been appointed the new chairman. C2 Capital Partners’ Steven Lin, who is the largest Bubs shareholder and a director, backed Ms Rathie’s appointment as did Paul Jenson, who joined the board in March.Mr Gualdi – who is also the founder of Shakespeare Pies and left his operational role at Bubs three years ago – said it was clear the company’s financial performance needed to improve, but added management was doing a “great job embracing the opportunities”.“The opportunity [in the US] is so great. And Bubs put resources towards this opportunity as they should have done,” he said. “I’m a co-founder and 100 per cent dedicated to the Kristy and Dennis approach to business. It has not been an easy time – COVID has not been easy for anyone – but I do believe their strategy is the right one going forward for the company.”Bubs is seeking permanent access to the US market after it was provided temporary access amid an infant formula shortage last year. But its focus on the US has led to lower sales in the world’s largest baby formula market, China, after the relaxation of Beijing’s pandemic health restrictions. Bubs shares closed on Wednesday at 20.5¢, down from a peak of 85¢ last May.Bubs also has a large number of retail shareholders. One long-time investor, who spoke on condition of anonymity, said there were “so many unanswered questions”.“I’m shocked and surprised by what’s happening. The announcement raises more questions than answers,” the investor said.Other shareholders include Australian Capital Equity and Wroxby, private vehicles controlled by billionaire businessman Kerry Stokes. They declined to comment.Hong Kong-listed Alpha Professional controls about 1.5 per cent of the company after a subsidiary penned an equity deal last year in exchange for minimum purchases of Bubs products.It has the exclusive distribution rights for Bubs in Hong Kong and China. It works closely with AZ Global run by Wenjun Zhang, another major Bubs shareholder.Discount chain Chemist Warehouse controls about 3.2 per cent of Bubs via CW Retail following another four-year equity deal struck in 2019.But C2 Capital is the largest shareholder, with a 10.15 per cent stake. The firm is backed by Alibaba and invests in companies capitalising on a growing middle class in China.Ms Carr has been silent since taking to LinkedIn last week to describe Mr Lin as a “true leader”.He “has masterminded and led every acquisition, merger, strategic partnership, capital raising and corporate development, as well as Bubs route-to-market and growth strategies in China and the USA”, Ms Carr wrote, adding she “100 per cent stands by him”.Mr Lin – who is also the chairman of private equity firm Cortina Capital – remains a non-executive director at Bubs. Both Mr Lin and Ms Carr declined to comment.Sales in Bubs’s infant formula portfolio, which makes up more than 80 per cent of the company’s revenue, fell 10 per cent in the three months to the end of December.This led to a 1 per cent fall in group revenue over six months to $37.9 million. Gross margins were also squeezed by an $8.4 million inventory write-down, and it took a $20 million impairment on its Deloraine Dairy processing facility plant.Carrie LaFrenz is a senior journalist covering retail/consumer goods. She previously covered healthcare/biotech. Carrie has won multiple awards for her journalism including financial journalist of the year from The National Press Club. Connect with Carrie on Twitter. Email Carrie at carrie.lafrenz@copyright link
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