SunOpta sunflower seed processing facility
SunOpta is a manufacturer of organic, non-bioengineered and specialty ingredients and food products.

NEW YORK — Tourbillon Capital Partners, L.P., which owns 9.9% of SunOpta, Inc.’s outstanding shares and calls itself the company’s largest shareholder, expressed disappointment in SunOpta’s management and board of directors in a May 27 letter and urged all involved to explore options for maximizing shareholder value, most notably the hiring of an independent investment banker to advise on future options, including the sale of the company.

Based in Mississauga, Ont., SunOpta is a manufacturer of organic, non-bioengineered and specialty ingredients and food products. In 2015, the company recorded EBITDA of $45.8 million on sales of $1,145.1 million. In 2014, the company generated EBITDA of $61.2 million on sales of $1,102.7 million.

Jason Karp, Tourbillon Capital Partnersolders.
Jason H. Karp, c.e.o. and c.i.o. for Tourbillon Capital Partners

“We have become increasingly concerned that the company may be pursuing an uncertain business plan without a thorough evaluation of all value-maximizing alternatives,” Jason H. Karp, chief executive officer and chief investment officer for Tourbillon Capital Partners, said in the letter. “For the reasons set forth below, we urge the company to immediately engage an independent investment bank to advise on a value maximization process — including the execution of a sales process — and to evaluate the results against other options, including the risk-adjusted value of continuing to operate on a standalone basis.

“Despite its strengths, the company has been unable to translate its quality products and services into a thriving business with an attractive public market valuation. Our public and private diligence has confirmed that SunOpta’s operations remain vastly under-optimized, which is affecting both business performance as well as valuation. Additionally, the company has been unable to capture industry tailwinds — growing at ~7% yearly since 2011 (with acquisitions) while the industry has grown at ~13% yearly.”

Mr. Karp added that he did not view the problems as being limited to operational inefficiencies and that effective capital allocation has been elusive for the company as well. He pointed to SunOpta’s 2015 acquisition of Sunrise Growers, a supplier of imported conventional and organic frozen fruits, that he said has been followed by disappointing performance for shareholders and has “repeatedly missed expectations and operating performance challenges.”

“It remains our firm belief that if the company were to fix its operational missteps, refocus and reprioritize its sales efforts, and effectively deploy capital, the company would be worth several times what it is worth today,” Mr. Karp wrote in the letter. “Unfortunately, we do not believe that the board shares our urgency to correct these deficiencies. Therefore, the company should immediately explore the potential value to shareholders that could be realized in a sale transaction to a strategic partner or a management buyout, and to evaluate the results of a fulsome sales process against other options including the risk-adjusted value of continuing to operate on a standalone basis.”

In a statement issued by SunOpta in response to Mr. Karp’s letter, management said the company would review Tourbillon’s suggestions and evaluate them on the basis of what is in the best interests of all shareholders.

“It is important to note that over the last year, SunOpta has worked to transform its business through the Sunrise acquisition and through a more deliberate focus on increasing private label products that offer customers some of the most innovative offerings in the organic, non-G.M.O. and specialty food categories,” the statement said. “In addition, our globally sourced ingredients business offers us unrivaled access to organic and non-G.M.O. supply and presents a high barrier to entry for competition. The company remains focused on creating efficiencies, improving operational excellence, reducing debt, and increasing profitability as a means to create long-term value for all our shareholders.”