Trian Fund Management LP has taken about seven percent stake in Sysco (NYSE:SYY), the company specializing in food service. The stake comprises of 42 million shares and worth about $1.6 billion. This deal will make Trian the biggest Sysco shareholder. This was disclosed by a 13-D filing on Friday afternoon.
Sysco is in the business of delivering supplies and food to restaurants. It has suffered a number of setbacks in recent times to its smaller and more nimble competitors like Restaurant Depot. The $3.5 billion deal made by the Houston headquartered company to restore its diminishing margins. The plan was to create annual savings of $600 million. Sysco must find such efficiencies of its own.
The Nelson Petz founded hedge fund Trian has argued of Sysco not reaching its full potential. It wants a place on board of directors in the latter company from where it will push for changes. These changes will hopefully improve the operating results. It remains unclear whether Peltz himself will sit on the Sysco board. The time for nominating candidates to the board closes on August 21. Sysco stock jumped eight percent following the stake report.
Peltz himself has rich food industry experience. He has held various positions in Wendy's (NASDAQ:WEN), Kraft Heinz Foods, Pepsi (NYSE:PEP) and Mondelez International Inc(NASDAQ:MDLZ). The Sysco deal gels well with his line of expertise. The performance of the latter shows why Trian would like to invest. Sysco shares have considerably underperformed the market and total shareholder return continues to be less than 50 percent of Standard and Poor over an identical period. Earnings for every share have declined too.
Sysco, in a company statement, said that it welcomes collaborative discussions with those investors who shares a common interest in the creation of value through marketing and also delivering excellent products to customers with superlative service. The company added that it has engaged with Trian. All investors could expect a constructive dialogue.
Sysco had a failed a merger beforehand with US foods. It was terminated in June 2015 due to the action being blocked by regulators. The company subsequently paid about $300 million in break-up fees to US Foods. Another $12.5 million was paid to Performance Food Group. The company also made an announcement of a buyback of $3 billion shares.
Train, presently Sysco's biggest shareholder, could now administer its business in a more efficient manner and can better align the compensation of the management with performance. There was no more declaration from Trian on this regard.