An investor in C&C group has called for a strategic review process to explore a potential sale of the beer, cider and manufacturer. 

Managing member at Engine Capital, Arnaud Ajdler, wrote in an open letter to the C&C board, that the drinks maker is a “perennial underperformer as a result of structural and self-inflicted problems.”

The New York-based Engine Capital owns just under 5% of the Ireland-listed drinks company, which makes Tennent’s lager, and Magners and Bulmers cider. 

Ajdler believes C&C is undervalued and urged the board to consider a strategic review to maximise shareholder value. The investor also believes C&C’s current valuation of 7x normalized EBITDA is a steep discount to transaction multiples in the industry (around 13x EBITDA).

“Given these dynamics, we believe the best path forward is for the board to explore strategic alternatives for the company,” he said. ”C&C remains a unique and strategic asset, which is why we are confident that buyers would pay a price that is far superior to its standalone value.”

Engine Capital estimates that C&C shareholders could receive between 239.00 and 263.00 GBp per share in a sale, representing a 58% premium to the current trading price.

In addition, C&C’s underperformance is due to its small size, complex portfolio, CEO succession risks, and strategic mistakes, it said. “The company is subscale with a small market capitalisation and limited daily trading liquidity. At the same time, the business is complex with disparate assets with different financial characteristics across different geographies,” Ajdler added. 

Engine Capital proposed the board strengthen its expertise with financial and M&A professionals, initiate a strategic review process to explore a potential sale, and incentivise management for a successful outcome.

It comes after the Irish drinks distributor and manufacturer appointed Ralph Findlay as CEO after discovering shortcomings in its financial reporting, earlier this month. 

Previous CEO Patrick McMahon, who was chief financial officer during the related period agreed to step down with immediate effect.

The drinks group acknowledged “accounting mistakes”, “errors of judgement”, “failures in reporting” and “opportunities missed”.

It comes as the group reports FY2024 net revenues of €1.65bn. EBITDA was €94m, while operating profit was €60m. 

In a regulatory update, C&C, announced prior year accounting adjustments are expected to be made in respect of inventory and balance sheet items.

The adjustments represent an underlying operating profit adjustments charge of €5m. By year, the restatements comprised a €1m adjustment charge in FY2023, a €3m adjustment credit in FY2022 and a €7m adjustment charge in FY2021.

In addition, the group is expecting to record an exceptional prior year (FY2023) charge with respect to onerous apple contracts of €12m which was initially expected to be recorded in FY2024.