A signal outdoors of a facility occupied by TreeHouse Meals in Brantford, Ontario, Canada.
Kristoffer Tripplaar | SIPA United states | AP
Firm: TreeHouse Foods Inc. (THS)
TreeHouse Foodstuff Inc. is a maker and distributor of personal label packaged meals and beverages in North America. It has close to 40 manufacturing amenities throughout North America and Italy. Its solution portfolio includes snacking, drinks, and meal planning merchandise, accessible in shelf secure, refrigerated, frozen, and contemporary formats.
Inventory Current market Benefit: $2.8 billion ($50.02 per share)
Share Ownership: 7.51%
Regular Expense: $41.68
Activist Commentary: JANA employs a value-oriented and investigation-intense technique to specific scenario public safety investing, capitalizing on the transactional, legal and finance backgrounds of its principals. JANA has in depth activist expertise. They use many shareholder resources together with letters, proxy fights, shareholder communications and lawsuits to achieve their activist aims. Nevertheless, they have crafted a track record for a ‘diplomacy first’ technique. JANA also companions with highly credentialed executives who convey precise industry know-how to the circumstances and lend believability to their arguments.
The organization does not use activism simply just to agitate boards and management, but to put into action seem, properly-conceived organization procedures that they strongly believe will greatly enhance shareholder value.
Barry Rosenstein, managing spouse at JANA, calls his activist approach “V cubed”. The a few “Vs” are”(i) Worth: you want to acquire in at the suitable selling price with a margin of security so that JANA however has a very good financial investment in the occasion the activism does not work (ii) Votes: you require to know irrespective of whether you have the votes prior to commencing a proxy struggle and (iii) Wide variety of approaches to get: you need to have to have a lot more than one strategy to improve worth.
On January 29, 2021, JANA notified TreeHouse Foodstuff of their intent to propose 3 nominees, Meredith Adler (Institutional Investor’s best ranked analyst in the food items and drug sector for 14 a long time), John Paul Gainor Jr. (former president and CEO of Dairy Queen) and Charles L. Myers (former portfolio manager at Fidelity), for election at the firm’s 2021 Once-a-year Meeting. JANA thinks this represents an desirable investment decision chance with TreeHouse virtually a few many years into a detailed turnaround.
The agency has had constructive conversations with TreeHouse’s board and administration about avenues to take care of the company’s undervaluation and complete stockholder return, including assessing a sale of the corporation, functions, money allocation, company governance and payment tactics.
JANA has extensive knowledge in this business, with a effective keep track of document in the client retail house and their involvement has led to product sales of Pinnacle, PetSmart, Safeway, Complete Meals and ConAgra’s spinoff of its Lamb Weston business. The company is aware of TreeHouse perfectly as a significant element of its property were being acquired from ConAgra at JANA’s urging.
JANA partner Scott Ostfeld is presently on the board of ConAgra, but do not appear for ConAgra to be a opportunity acquirer. It is not fascinated in private label output, which is why it sold the Ralcorp business to TreeHouse in 2015 for $2.7 billion, considerably less than three decades from attaining it for $5 billion.
TreeHouse is a pure perform personal label small business, which is an place of great secular tailwinds. Non-public label brand names are less costly for consumers, much more lucrative for stores and do not have the stigma of generic models of yesteryear (imagine Complete Meals 365 or Costco’s Kirkland). As a result, shelf place has been migrating towards personal label space, with remarkable growth in the US, which is not shut to the penetration amount of Europe.
TreeHouse is a number of decades into an intensive turnaround method that has served it appreciably make improvements to its solution portfolio, go-to-market construction, and offer chain and service functions. Nonetheless, it is also a broken equity tale in that these operational enhancements have not been reflected in the inventory value. As a single of the only pure enjoy personal label brands, with no real comps, TreeHouse is not a great public corporation. The prospect is for it to be offered to private equity, who has a ton of dry powder and a whole lot of force to do specials. Moreover, JANA is familiar with most of the probable purchasers possessing marketed numerous comparable organizations in the past to firms like Cerberus, Veritas, BC Companions and Clayton, Dubilier and Rice.
So, what is TreeHouse worthy of? In 2018, Write-up bought section of its non-public label enterprise to Thomas H. Lee Associates for in excess of 10 instances EBITDA. A 10 occasions various here would indicate a six tackle on a sale. Comparable to their engagements in Entire Foods, ConAgra and Pinnacle, JANA has but again teamed up with globe-class executives who they are nominating to the board. When their abilities would not be as essential in the context of a sale of the firm, they could surely help assess a opportunity sale, and they have large encounter in general public markets as very well, so they can assistance rehabilitate the equity tale in the meantime.
Ken Squire is the founder and president of 13D Keep track of, an institutional study provider on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments.