Nelson Peltz’s Trian Fund Management has acquired a 7.08 percent stake in Sysco, making it the food distributor’s largest shareholder. Finally, there’s even the possibility of a proxy fight, which sources said is not being ruled out-although Trian is said to hope that one won’t be needed.
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Trian officials have met with and spoken to Sysco CEO William Delaney and non-executive chairman Jackie Ward about Peltz’s recommendations for improving the stock price, the firm said in its filing. “We are aware of their actions”, a Sysco spokesman told CNBC.
Trian said it has also discussed board representation with the company.
Shares of Sysco Corp. jumped almost 7 percent Friday afternoon to $41.04.
Sysco has underperformed its potential and “should adopt strategic and operating initiatives to improve operating margins, enhance working capital efficiency, consider the use of prudent amounts of incremental leverage to increase the amount of capital returned to shareholders, and take steps to better align management compensation with corporate performance”, Trian said.
“We welcome collaborative discussions with investors who share our interest in creating value by marketing and delivering great products and services to our customers with exceptional service”, the company said. Sysco’s shares over the past five years are up just 8% annually, versus 12% for all food distribution peers and 16.5% for S&P 500 stocks, according to Morningstar.
The company in June dropped plans to buy smaller rival US Foods for $3.5 billion after the Federal Trade Commission won a lawsuit to block the deal.
Activist investors like Peltz are also facing criticism that they are pushing companies to spend money on investors through dividends and buybacks rather than investing on long-term growth.
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New York-based Trian recently disclosed a new stake in Pentair Plc, urging the provider of water and filtration systems to more aggressively buy competitors.
