Bitter row at Topps Tiles escalates ahead of crunch AGM

Topps Tiles, the Leicester-based tile specialist, has issued a warning after it said one of its major shareholders has been contacting other stakeholders with what it is calling “contradictory information” ahead of its AGM later this month.

Topps has accused MS Galleon (MSG) of misleading other shareholders over a statement made directly to Topps around the link between sourcing and MSG’s equity interest in the company. Topps says it also believes MSG may also be preparing to launch its Nexterio tile retail brand in the UK, which it believes will potentially establish a direct competitor to Topps, which would create a further conflict of interest.

MSG owns Cersanit, a major European producer of tiles, in addition to having a range of home improvement and tile retailing interests, primarily in the Polish market. On December 6 Lynchwood Nominees, on behalf of MS Galleon, pushed through resolutions to replace Darren Shapland, Topps’ non-executive chairman and director of the company, while at the same time install Lidia Wolfinger and Michael Bartusiak as non-executive directors at the AGM on January 18.

MSG currently owns approximately 29.8% of Topps. Lidia Wolfinger and Michal Bartusiak are both employees of companies owned by MSG.

Topps now says it has secured further support from key shareholders against the resolutions. The firm said this morning (January 6) that 41% of Topps’ shareholders have now committed to vote against the resolutions.

A statement from Topps said: “The board does not consider the Requisitioned Resolutions to be in the best interests of the company and its shareholders as a whole and has therefore recommended that shareholders vote against the Requisitioned Resolutions at the AGM.”

“Since its announcement of 7 December 2022, the Topps board understands that MSG has been contacting certain Topps shareholders individually in an attempt to garner support for the Requisitioned Resolutions. Information provided to shareholders by MSG included a statement that it had recently discussed increasing its share of Topps’ product purchases to 5%.”

However, this statement, says Topps is “not an accurate representation of the entirety of those discussions” and directly contradicts statements made by MSG to Topps.

The statement added: “MSG has, on a number of occasions, directly linked the level of its equity holding in the Company with the level of supply that it wishes Topps to source from Cersanit. To this end, one of the proposed directors, Lidia Wolfinger, requested as recently as 25 November 2022 that Topps should source 29.9%. of its tile purchases from Cersanit in line with MSG’s shareholding in Topps, with interim stage gates for achieving a 5% and then 10%. share over the short term.”

Topps says it has reviewed opportunities to source products from Cersanit, and that the “frequent conclusion” has been that as a supplier it is uncompetitive when compared with other manufacturers of similar products.

The statement went on: “The board continues to believe that all sourcing should be conducted on an arms-length commercial basis. In addition, a diverse global supply chain is a key source of competitive advantage for Topps and the Board believes strongly that becoming overly reliant on a single supplier is not in the best interests of the Company and its shareholders as a whole. Topps’ sourcing policy does not allow for more than 10% of tile purchases to come from any one supplier in order to avoid concentration risk.

“The board believes it is incompatible for the proposed non-executive directors to have the target of increasing tile purchases from Cersanit to 29.9%, whilst at the same time acting in the best interests of all shareholders of Topps.”

MSG owns Nexterio, a retailer of tiles and associated products with over 40 outlets in Poland.Topps says it understands is being prepared for a launch into the UK. A new company, Nexterio.UK Limited was incorporated on 22 November 2022, the website www.nexterio.co.uk has been registered and the Topps says it has learned that a search for suitable trading locations around the UK is underway.

Topps’ statement said: “Nexterio would be a direct competitor to Topps, and the board believes that the appointment of non-executive directors onto the Board who represent a direct competitor would be a further conflict of interest and would not be in the interests of all shareholders of Topps.”

Darren Shapland, non-executive Chairman of Topps, said: “The board continues to believe that these proposals would expose shareholders to a number of serious conflicts of interest and are not therefore in the interests of all shareholders of the company. The board welcomes the strong support received from other large shareholders who support the Board’s position in voting against the Requisitioned Resolutions at the AGM.”

Keith Down, senior independent director of Topps, said: “The board has unanimously rejected these resolutions which it does not believe are in the best interests of the company and its shareholders as a whole. MSG is attempting to remove the chairman, who has been leading communications with MSG on behalf of the board, to allow it to increase its control over the business.”