Lifeway Foods Proxy Battle: A Family Feud Over a Failed Danone Deal

CHICAGO, IL – December 11, 2025 – The boardroom at Lifeway Foods (Nasdaq: LWAY), a leader in the kefir products market, has become the epicenter of a contentious proxy battle that blends corporate governance disputes with a deep-seated family conflict. Edward Smolyansky, the company’s largest shareholder, launched a blistering public campaign this week, urging fellow investors to overhaul the board and oust his sister, CEO Julie Smolyansky. The move escalates a multi-year struggle for control, bringing to a head fundamental questions about the company’s strategic direction, executive compensation, and the handling of a spurned nine-figure acquisition offer from French dairy giant Danone.

In a letter to shareholders, Edward Smolyansky, who along with his mother, co-founder Ludmila Smolyansky, holds a 26.17% stake, called for a decisive vote against the incumbent leadership at the upcoming December 29 annual meeting. He is nominating himself and George Sent to the board, arguing their election is “the Only Way to Restore Accountability.” At the heart of his campaign are pointed allegations that the current board destroyed shareholder value by mishandling Danone’s acquisition interest and fostering a culture of entrenchment and excessive spending.

The Ghost of a Rejected Deal

The current proxy fight is haunted by the shadow of what could have been. In late 2024, Danone - already a long-time shareholder with a 23.4% stake - made an unsolicited offer to acquire Lifeway for $25 per share, later increasing its bid to $27 per share, valuing the company at approximately $307 million. For many investors, the offer represented a significant premium and a clear path to realizing value.

However, Lifeway’s board, led by CEO Julie Smolyansky, rejected both offers, labeling them “opportunistic” and insisting they “substantially undervalue” the company. In a defensive move, the board adopted a shareholder rights plan, or “poison pill,” to deter a hostile takeover. This plan was later extended into 2026 without a shareholder vote, a move Edward Smolyansky decried as a “power grab.”

In his public appeal, Edward claims the board’s response involved “entrenchment, litigation, and an attempted and unprecedented equity award to the CEO that undermined negotiations.” He argues that a properly run, independent sale process remains the fastest path to value for shareholders, a goal he seeks to achieve by forming a new Strategic Review & Performance Committee if his slate is elected.

Danone officially withdrew its proposal in September 2025, citing the board’s unwillingness to engage. While Lifeway’s management expressed relief at moving past the “distraction,” the dissident shareholder campaign frames the episode as a monumental fiduciary failure.

Allegations of Excessive Pay and Failed Oversight

Fueling the dissident campaign are sharp criticisms of Lifeway's executive compensation practices and board governance. Edward Smolyansky alleges that the board approved an outsized compensation package for his sister, CEO Julie Smolyansky, worth over $8 million, including a $2 million retention bonus and significant equity grants. While public filings show her total compensation was $2.8 million in 2023 and $5.3 million in 2022, the dissident faction points to these figures as evidence of a board that has “failed its most basic fiduciary responsibilities.”

The fight has also taken on a deeply personal tone, with the dissident campaign vowing to “enforce anti-nepotism” and alleging undue influence from the CEO’s spouse. This family dynamic is not new for Lifeway. The company was founded by Michael Smolyansky in 1986, and the current battle pits his children, Julie and Edward, against each other. Their mother, Ludmila, who co-founded the company and previously served as Chairperson, now sides with her son in the push for change.

Governance concerns extend to the board's independent directors. The dissident letter specifically calls to withhold votes from CEO Smolyansky, Dorri McWhorter, and Jason Scher. Questions have been raised about Scher, the Lead Independent Director, who sold nearly all his personal stock holdings in June 2025, reducing his ownership to a single share. To the activists, such actions signal a lack of alignment with long-term shareholder interests.

A Contested Narrative on Performance

Lifeway’s leadership has countered the dissident narrative by pointing to strong operational results, including 24 consecutive quarters of year-over-year net sales growth and record revenue of $57.1 million in the third quarter of 2025. The company’s stock has significantly outperformed its peers in the Russell 3000 Food Producers Index. Management argues that its strategy is delivering results and that the dissident campaign is a disruptive distraction rooted in a long-running family dispute.

However, Edward Smolyansky argues that these top-line figures mask underlying issues. His letter states that “record revenues” mean little when operating income stagnates and EBITDA margins decline. An analysis of financials reveals a mixed picture. While revenue growth is undeniable, the company has struggled to generate strong free cash flow, and certain quarters have missed earnings estimates, triggering negative stock reactions. Other quarters, however, have exceeded expectations, leading to stock price gains. This conflicting data allows both sides to construct a narrative that supports their position, leaving shareholders to decide whether the recent stock rally is a product of strong management or simply lingering M&A speculation from the Danone bid.

An Uphill Battle for Change

Despite the force of the dissident campaign, unseating the incumbents will be a formidable challenge. The incumbent board recently attempted to address governance criticisms through a cooperation agreement with Danone, which led to the appointment of four new, unaffiliated independent directors and the separation of the CEO and Chairman roles. Lifeway presents this as a significant board refreshment that makes the proxy fight unnecessary.

The role of proxy advisors remains a contested point in the campaign. While reports have cited a “DO NOT VOTE” recommendation from Institutional Shareholder Services (ISS), the dissident group clarifies that this guidance was issued in July 2025 regarding a separate consent solicitation process, not the upcoming annual meeting. Edward Smolyansky notes that his group did not meet with ISS during that period and that the July report predated Lifeway’s August 1 agreement to negotiate with Danone. ISS has not yet issued a recommendation for the December 29 contest, and the dissidents highlight that Lifeway has not yet presented a public plan for the current election.

With no current ISS recommendation yet in play to guide institutional investors, the Smolyansky-led campaign argues that the previous guidance is irrelevant to the current strategic landscape. The upcoming vote will ultimately serve as a referendum on whether shareholders believe the recent board refreshment is sufficient, or if the deep-seated issues of governance, compensation, and the memory of a lost premium offer warrant a more radical overhaul.

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Note: article was edited to correct significant missing information