Activists Target Lamb Weston and Other Food Companies

Sluggish sales growth and changing consumer habits are drawing activist investors toward packaged food companies and restaurant chains.

Jana Partners reached an agreement last year with Lamb Weston to add board members and push operational reforms. (Photo: Lamb Weston SG Facebook) 

The latest example is hedge fund Starboard Value, which has built a sizable stake in Lamb Weston, the Idaho-based frozen potato supplier to fast-food chains including McDonald’s and Chick-fil-A, Barron’s Daily reported.

Starboard is pushing the company to cut $500 million in costs, double the $250 million savings currently targeted by Lamb Weston.

The hedge fund also wants a strategic review of the company’s international operations, including a potential sale of underperforming assets in the Asia-Pacific region, and a 25% margin target for earnings before taxes and depreciation.

In a letter to the company, Starboard said management should not focus solely on achieving a specific cost-cutting number because those gains often disappear in financial results.

Other activist investors have recently targeted food companies as well.

Jana Partners reached an agreement last year with Lamb Weston to add board members and push operational reforms.

Elliott Investment Management built a $4 billion stake in PepsiCo, urging cost reductions, divestitures and a sharper corporate strategy. J.M. Smucker also agreed to appoint two new directors after Elliott pressed the company for operational changes.

Meanwhile, activist investor Nelson Peltz, whose firm Trian Fund Management owns about 16% of Wendy’s, said the fast-food chain’s shares are undervalued and that strategic options—including leadership changes, mergers or a sale—could be explored.