In a letter to the group’s board, Engine Capital called on the Bulmers maker to explore “strategic alternatives” for the company.
The activist investor described C&C Group as a “perennial underperformer,” adding that its current trading valuation is entirely disconnected from the strategic value of its assets.
C&C, which has manufacturing operations in Co. Tipperary, owns Bulmers, Magners and Tennent’s, as well as brands such as Five Lamps and Orchard Pig.
The group exports its Magners and Tennent’s brands to over 40 countries.
Engine Capital said it was confident that buyers would pay a price for C&C Group that is “far superior” to its current value.
Following a review of similar transactions, Engine Capital expects that shareholders could receive between 239p and 263p per share in value if the company is sold.
This would represent a 58pc premium to its current trading price at the midpoint of this potential range, it reported.
It added that the company would be a suitable candidate for a sale to private equity buyers or companies that already own a global established brand due to C&C’s strong brands and UK manufacturing facilities.
However, the investor also attributed the market’s undervaluation of C&C Group to a number of “structural and self-inflicted problems.”
This includes its size, as well as its “complex” portfolio, which is active across different geographies.
“As a result, the company has no pure play peers of similar size or geographic composition, making it more difficult for public market investors to evaluate, diligence, and value it,” Engine Capital managing member Arnaud Ajdler wrote.
Mr Ajdler also pointed to other challenges, including “succession missteps, strategic mistakes, execution blunders, and an inability to return to its higher historical earnings profile.”
The company has had four chief executives in less than four years, which has also contributed to ongoing uncertainty.
Earlier this month, Patrick McMahon resigned after just a year in the job after the company said it had made a number of significant accounting adjustments dating back to a period when he was chief financial officer at the group.
C&C’s chairman Ralph Findlay has taken over as chief executive and will stay in the role for up to 18 months until a permanent successor is found.
Engine Capital urged the group to consider a sale given the risks of resolving the ongoing issues, as well as to add a number of new directors with experience in finance, M&A and capital markets to the board.
It also called on the group to introduce a compensation framework for critical employees ahead of any potential transaction to “appropriately motivate” these workers.
The company reported a pre-tax loss of £111m for the year to the end of February, plunging from a profit of £52m the prior year. It reported weaker demand for cider in Britain but success from Tennent’s and Bulmers here.
