Musti Group, led by its new majority owner, decided to stop paying dividends.
Must Group made a complete turnaround in its dividend policy on Monday evening.
The pet supplies company, which is guaranteeing a fairly positive result, said in its announcement published after the stock market closed that it is no longer worth expecting dividends from the company. According to the board’s own justification, the decision is based on the desire to use the company’s funds instead of dividends “to finance growth and investments”.
Based on the numbers, it’s difficult to find any rational basis for the change in line, because Musti has generated a good six percent of net income in recent years. Despite paying dividends, the company already had ambitious growth goals, which the company’s board of directors decided to abandon on Monday.
The company justified abandoning its goals by saying that with the new majority owner, the company is now in a “new strategic phase”.
The collapse of the purchase offer didn’t hurt
Portuguese Sonaen led by Flybirdconsortium tried to buy Musti Group off the stock exchange at the end of the year. Many investors considered the price of EUR 26.10 offered for the shares to be too low, and the consortium was not able to acquire enough company shares to go through with the purchase offer.
Although the offer was not enough to buy the company off the stock market, the consortium bought all the shares it could.
At the end of March, Flybird owned 81 percent of Musti’s entire share capital. Musti is still on the stock exchange, but firmly on the leash of its new majority owner: for example, everyone in the company of the government members now have a clear connection to the buyer consortium.
Already seen
The board of Musti Group’s decision to freeze dividends inevitably brings to mind a shipping company of Finnlines incident from years ago.
Italian Grimaldi made a purchase offer for Finnlines, which is listed on the Helsinki Stock Exchange, in 2006. The purchase offer was not high enough for the offer to go through, but together with the share purchases, it was enough to make Grimaldi the majority owner of the company.
After Grimaldi became the majority owner, the board of Finnlines unexpectedly turned off the company’s dividend tap, the board justifications to finance the company’s investments. According to critics, the real purpose of closing the dividend taps was to smoke the minority shareholders out of the company, and the legality of the procedure was argued up to the Supreme Court.
After a long battle of exhaustion, Grimaldi finally got what he wanted.
In 2016, the Italians got their ownership increased to more than 90 percent, after which the Finnish shipping company was forced out of the stock market. Due to the special situation that lasted for years, Finnlines floated its last stock market years as a lame duck, practically at the mercy of its majority owner.
A cynic might think that the new owner of the Musti Group is now following Grimaldi’s playbook.
Be that as it may, Musti’s new dividend policy is a clear warning to the company’s thousands of minority shareholders about who in the company will decide on matters in the future. When Flybird commands, Black obeys.
The author is the editor of Kauppalehti.