Jana Partners took a stake in the struggling potato company.
Shares of Lamb Weston (LW 9.65%), one of the world’s largest producers of frozen potatoes, were moving higher today on news that an activist investor had taken a stake in the struggling food stock.
As of 11:19 a.m. ET, the stock was up 9.9% on the news.
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Jana sees an opportunity
According to a report in The Wall Street Journal, Jana Partners has accumulated a roughly 5% stake in Lamb Weston with the intention of pushing the company to consider a sale.
Jana disclosed the stake in a Securities and Exchange Commission (SEC) filing later this morning, saying it sees a history of self-inflicted errors that have led to its underperformance, and that it aims to discuss its turnaround proposals with the board of directors and management.
Jana also sees opportunity for Lamb Weston to improve its capacity utilization, capital spending, and other core operating functions like procurement and planning. Jana said it planned to encourage a review of strategic alternatives, which typically implies a sale.
The activist investor often targets the food industry and has had success in the past. The firm took a stake in Whole Foods and was able to engineer its sale to Amazon.
What it means for Lamb Weston
Lamb Weston is coming off two disappointing earnings reports, and is struggling with, among other things, declining french fry sales at McDonald’s. In its most recent quarter, the company reported a 1% decline in revenue to $1.65 billion, and adjusted operating income fell 56% to $105 million.
Lamb Weston has yet to issue a statement, but investors seem to expect it to be receptive to talks with the activist.
Given that weakness and Jana’s track record, it’s not surprising investors are reacting positively to the news.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
