Activist Investor Jana Partners Ramps Up Pressure on Lamb Weston
New Executive Joins the Fray
Jana Partners, a prominent activist investor, has enlisted the help of potato industry veteran Jeff Delapp to push for significant changes at Lamb Weston, the leading french fry manufacturer. This move signals that Jana Partners may be seeking to replace a majority of the company’s board members.
A Seasoned Expert Joins the Team
Delapp, who previously served as president of Lamb Weston and later as president of McCain Foods, North America, brings a wealth of experience to the table. His expertise will likely be instrumental in shaping the future of Lamb Weston.
Jana Partners’ Demands
Jana Partners, which owns more than 5% of Lamb Weston, has been vocal about its desire for the company to improve its operations and capital allocation or consider putting itself up for sale. The investor’s concerns have been exacerbated by Lamb Weston’s recent disappointing earnings report, which sent the stock price plummeting by as much as 20%.
Lamb Weston’s Struggles
The company’s struggles are evident in its recent financial performance. Since January, Lamb Weston’s shares have dropped a staggering 39%. The company’s unexpected CEO change, which saw Tom Werner replaced by Michael Smith, has also raised eyebrows. Lamb Weston attributed the change to a “thoughtful, year-long succession planning process.”
A Challenging Quarter
Lamb Weston’s fiscal second-quarter results were dismal, with the company reporting a $36 million loss due to declining sales and higher manufacturing costs. The company has subsequently cut its earnings outlook for the full year.
Jana Partners Turns Up the Heat
In the wake of Lamb Weston’s disappointing earnings report, Jana Partners has intensified its pressure on the company’s board. The investor has been scathing in its criticism, labeling last week’s earnings report a “disaster” and suggesting that Smith, as part of the executive team, is “complicit in (Lamb Weston’s) widespread operational and strategic debacle.”
Wall Street Weighs In
Analysts are interpreting the recent developments as a sign that a Lamb Weston transaction may be increasingly likely. Jefferies analyst Rob Dickerson believes the CEO change “feels like a panicked move,” while Barclays analyst Andrew Lazar suggests that last week’s guidance and stock move “could make future strategic changes even more likely.”
A Possible Deal on the Horizon?
Earlier this month, Reuters reported that Post Holdings is working with bankers on a possible Lamb Weston deal. Jana Partners, which often partners with strategic and operating partners, has indicated that it is working with Continental Grain and that several executives, including former Lamb Weston Executive Chairman Timothy McLevish, could be nominees.
The Clock is Ticking
With Lamb Weston’s last annual meeting held in September, the clock is ticking for the company to respond to Jana Partners’ demands. One thing is clear: the stakes have never been higher for Lamb Weston’s board and management team.
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