Edward and Ludmila Smolyansky Request Lifeway Foods Inc. NASDAQ (LWAY) CEO Julie Smolyansky Immediately Withdraws Her Lawsuit Against Edward Smolyansky. Reiterate and Reaffirm Singular Goal Amid Ongoing Activism Battle

Rhea-AI Summary

Edward and Ludmila Smolyansky, controlling approximately 28% of Lifeway Foods (NASDAQ: LWAY) shares, have demanded CEO Julie Smolyansky withdraw her lawsuit against Edward Smolyansky. This follows a $2 million retention bonus awarded to Julie Smolyansky by the Compensation Committee in December 2024.

The Founding Shareholders question the independence of directors Jason Scher and Pol Sikar, citing their personal ties to Julie Smolyansky. They plan to expand their investigation that began in 2019, following the departure of two CFOs in 2018 and subsequent departures of two independent directors and the company's general counsel.

Ludmila Smolyansky began selling shares on January 3 to defend Edward after Lifeway's legal counsel allegedly refused to provide paperwork for Edward to monetize his holdings under their 1999 Shareholders Agreement with Group Danone. The activist campaign launched in 2022 has reportedly increased LWAY's share price, despite ongoing management conflicts.

Positive

• Activist campaign since 2022 has led to significant increases in share price
• Founding shareholders control 28% of voting power

Negative

• $2 million retention bonus awarded to CEO amid corporate disputes
• Internal governance issues with multiple executive departures
• Legal disputes between major shareholders and management
• Potential conflicts of interest among board members

Insights

Corporate Governance Analyst

The unfolding situation at Lifeway Foods presents a textbook case of corporate governance dysfunction that should concern investors. The conflict centers on a $2 million retention bonus awarded to CEO Julie Smolyansky, which the Founding Shareholders (controlling 28% of voting shares) view as inappropriate use of corporate funds.

Several red flags warrant investor attention:

• The rapid turnover of two CFOs in 2018, followed by departures of independent directors and general counsel, suggests potential internal control issues
• The timing correlation between the retention bonus (December 23) and subsequent lawsuit (January 23) raises questions about the proper use of corporate resources
• Allegations of board member conflicts due to personal relationships could compromise independent oversight
• The public nature of this family dispute risks destabilizing business operations and eroding shareholder value

While the activist campaign has reportedly driven share price appreciation, the escalating governance crisis presents material risks. The inability of major shareholders to monetize their holdings due to apparent administrative obstacles further complicates the situation. Investors should monitor this situation closely, as the outcome of this power struggle will likely determine the company's strategic direction and governance structure.

Legal Analyst

The legal complexities in this case present significant risks for Lifeway Foods and its shareholders. The timing and circumstances surrounding the $2 million retention bonus could potentially trigger shareholder derivative lawsuits, as it raises questions about breach of fiduciary duty and proper use of corporate assets.

Critical legal considerations include:

• The 1999 Shareholders Agreement with Group Danone appears to be creating obstacles for share monetization, which could lead to additional litigation
• The alleged refusal to provide necessary paperwork for share transactions could constitute improper interference with shareholder rights
• Board members' personal relationships with the CEO may create exposure to claims of breach of fiduciary duty
• The multiple layers of litigation risk depleting corporate resources and diverting management attention from business operations

The situation appears ripe for regulatory scrutiny, particularly regarding corporate governance practices and potential conflicts of interest. Shareholders should anticipate prolonged legal battles that could significantly impact company value and operations.

• Summarizes recent filings and next steps, previews upcoming proxy schedule
  
  
• Reaffirms and updates previously stated goal

CHICAGO, Feb. 3, 2025 /PRNewswire/ -- Edward and Ludmila Smolyansky ("Founding Shareholders"), who together exercise sole voting control with respect to approximately 28% of the outstanding shares of common stock of Lifeway Foods, Inc. ("Lifeway" or the "Company"), today requested that Lifeway's Board of Directors force its CEO and Chairperson, Julie Smolyansky to immediately withdraw her most recent lawsuit filed in Cook County, IL against the Company's largest individual shareholder Edward Smolyansky.

On December 23, 2024, Lifeway's Compensation Committee, led by director Jason Scher, awarded what was described as a $2 million "retention bonus."  The Smolyanskys believe this was yet another desperate leverage tactic to enable Julie Smolyansky to continue to fund her war against the Founding Shareholders. Directors Scher and Pol Sikar in particular, given their decades old family ties to Julie Smolyansky and her spouse and former jeweler, Jason Burdeen, have deep and conflicting personal motives that run contra to those of the rest of the Company's shareholders. These obvious conflicts are presented at www.lifebacktolifeway.com. Additionally, the Smolyanskys intend to expand their ongoing investigation, which began in 2019 and which followed the departure of two CFOs in 2018 alone and ultimately led to the departures of two independent directors and the Company's general counsel shortly thereafter.

Edward Smolyansky said, "Lifeway seems determined to plunge the Company deeper and deeper into litigation this time via proxy by Julie. We look forward to providing all shareholders a fully transparent accounting of the inner workings of America's Worst Governed Publicly Traded Company."

Ludmila Smolyansky stated, "After they cut a check to Julie for $2 million, I anticipated that she would file a lawsuit against Edward the following month." Mrs. Smolyansky continued, "On January 23, Julie filed suit. In anticipation of this, on January 3, I began to sell some of my shares to defend Edward. I have no choice, as Lifeway's legal counsel has refused to provide the adequate paperwork to Edward to monetize his holdings in LWAY as permitted under our 1999 Shareholders Agreement between our family member and Group Danone."

The activist campaign that The Smolyanskys launched in 2022 has produced significant increases in the value of Lifeway's share price, yet Julie and her Board seem determined to obstruct the ability to monetize these assets and prohibit making significant charitable contributions. For example, last May, the charitable arm of the Founding Shareholders' new organization, Pure Culture Organics, announced its commitment to the Ann & Robert H. Lurie Children's Hospital of Chicago.

Ludmila Smolyansky stated, "While my daughter's Board can attempt to interfere with our philanthropic efforts, these are mere speed bumps on the road to our singular goal, fresh new management and new independent slate of Directors."

For more information and update to date news connect with Edward on LinkedIn @ Edward Smolyansky and visit www.lifebacktolifeway.com to learn more about the Proxy Campaign.

View original content:https://www.prnewswire.com/news-releases/edward-and-ludmila-smolyansky-request-lifeway-foods-inc-nasdaq-lway-ceo-julie-smolyansky-immediately-withdraws-her-lawsuit-against-edward-smolyansky-reiterate-and-reaffirm-singular-goal-amid-ongoing-activism-battle-302366859.html

SOURCE Edward and Ludmila Smolyansky

FAQ

What percentage of Lifeway Foods (LWAY) is controlled by Edward and Ludmila Smolyansky?

Edward and Ludmila Smolyansky exercise sole voting control of approximately 28% of Lifeway Foods' outstanding shares.

How much was the retention bonus awarded to LWAY CEO Julie Smolyansky in December 2024?

Lifeway's Compensation Committee awarded Julie Smolyansky a $2 million retention bonus on December 23, 2024.

When did the Smolyanskys begin their activist campaign against LWAY management?

The Smolyanskys launched their activist campaign in 2022.

What triggered Ludmila Smolyansky to sell LWAY shares in January 2025?

Ludmila Smolyansky began selling shares on January 3, 2025, to defend Edward after Lifeway's legal counsel allegedly refused to provide paperwork for Edward to monetize his holdings.

How many CFOs left Lifeway Foods (LWAY) in 2018?

Two CFOs departed from Lifeway Foods in 2018.