By Svea Herbst-Bayliss
NEW YORK (Reuters) – Activist investor Jana Partners urged Lamb Weston on Monday to replace board members and top executives to improve its performance or else put itself up for sale.
“Lamb Weston’s Board and management have wasted the chance to sustain and grow shareholder value in a high-quality business,” the hedge fund’s managing partner Scott Ostfeld wrote in a letter to the board. “There is urgent need – and strong desire – for significant Board and leadership change at Lamb Weston,” the letter continued.
If the board is unwilling to make “significant changes needed to repair Lamb Weston,” then the company should put itself up for sale at a time when strategic buyers are interested, the letter said.
Lamb Weston did not immediately respond to a request for comment.
Jana owns more than 5% of the roughly $11 billion company and said in October that it wanted to see improvements in operations and capital allocation, and possibly a sale.
In Monday’s letter, Jana said Wall Street has reacted positively to its involvement and that the company’s value has been increased by roughly $1 billion.
Holding company Continental Grain is working with Jana on the investment and the partners have identified several industry executives, including former Lamb Weston executive chairman Timothy McLevish, as potential board candidates, Jana said earlier.
The letter says financial and operating deficiencies have cost Lamb Weston nearly $400 million in EBITDA over the last 2-1/2 years. It said increased spending had cut free cash flow and dented confidence.
Jana also pointed to “questionable use and disclosure practices” around the company’s aircraft, citing heavy use of a plane between its headquarters in Boise, Idaho, and Omaha, Nebraska, 1,000 miles away. The letter said Omaha “appears to be the CEO’s primary residence.”
(Reporting by Svea Herbst-Bayliss; Editing by Kevin Liffey)
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