MS Galleon Continues To Challenge Topps Tiles

The Times has reported that Austrian private equity firm MS Galleon used its 29.9% stake in Topps Tiles PLC to vote against several proposed resolutions at its recent AGM. 

On Wednesday of last week, Topps announced that all proposed resolutions had been passed by the requisite majority of 50% at the AGM, but noted that Resolution 3 (Approval of the directors' remuneration report), Resolution 7 (Re-election of Robert Parker as a director), Resolution 9 (Re-election of Diana Breeze as a director) and Resolution 13 (Directors' authority to allot shares), passed with a majority of less than 80% (receiving votes in favour of 60.49%, 60.48%, 60.02% and 60.54% respectively). 

Topps Tiles' biggest shareholder is MS Galleon (MSG), an Austrian private equity firm, which owns a 29.9% stake in the business and was responsible for the high percentage of opposition to the resolutions. MSG owns Cersanit, a major European producer of tiles and supplier to Topps Tiles, in addition to having a range of home improvement and tile retailing interests, primarily in the Polish market.  

During 2021, MSG approached Topps regarding (i) the potential appointment of an MSG representative to the Board, and (ii) a proposal that Topps should purchase a greater proportion of its tiles from Cersanit.  MSG has consistently set out its belief that the proportion of Topps’ tile supply purchased from Cersanit and its representation on the Topps Board should directly reflect its shareholding in Topps, which at that point was approximately 20%.

Topps did not consider the increase to be in the interests of shareholders as a whole and sought to engage with MSG to explain that the Company’s expertise in ranging, sourcing and procurement of tiles from a wide range of suppliers on a global basis is a core part of its competitive advantage, and its iterative programme to develop and produce differentiated products that are innovative, of high quality and exclusive to Topps Group is a key strength of the Group.  In addition, Topps’ sourcing policy does not allow for greater than 10% of tile purchases to come from any one supplier in order to avoid concentration risk.  Any purchases from Cersanit would also need to comply with Chapter 11 of the UK Financial Conduct Authority’s Listing Rules on related party transactions.  In the financial year ending 2 October 2021, Topps sourced 0.5% of its cost of goods sold (by value) from Cersanit on commercial arm’s length terms.

No proposal was received when Topps Tiles requested that MSG should set out in writing its rationale for a Board seat, including why an MSG appointed non-executive director would be additive to the already well-qualified Board, why the appointment would be in the interests of all Topps shareholders, and how conflicts of interest would be managed.  

Other challenges to Topps Tiles from MSG include seeking to oust then-chairman Darren Shapland in December 2022, and further appoint two of its own staff to non-executive director roles. 

Rob Parker, who has been chief executive officer of Topps Tiles since 2019 and with the business for 18 years, announced on the 8th January that he would be leaving the business later this year. 

Paul Forman, Chairman, said of the AGM outcome: “We engage with all our larger shareholders on a regular basis and listen closely to their views. Our strategy was reviewed in April and presented to shareholders in May, with further updates given last week. Further expansion of our digital capabilities is at the heart of many of these growth initiatives. Our latest results show that we continue to take market share, consistently outperforming the wider tile market despite very challenging trading conditions. We believe this demonstrates the effectiveness of our strategy, which has the full support of the Board.”

Source : Insight DIY; statements from Topps Tiles PLC reports

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