Here’s Why This Fry Supplier’s Stock Fell Monday

Here's Why This Fry Supplier's Stock Fell Monday

Key Takeaways

  • Lamb Weston shares fell Monday, when the company announced it reached an agreement with the activist investment firm, Jana Partners Management.
  • Investors sent the stock higher when Jana’s stake in Lamb Weston was disclosed, suggesting they may have envisioned Jana’s involvement leading to a more dramatic outcome.
  • Under the agreement, Jana will play a role in appointing six board members, including the next chairman, former Nestlé USA leader Bradley Alford.

Lamb Weston shares were among the S&P 500’s worst performers to start the week as investors learned that the activist investors pushing for change at the fry company may have delivered less than hoped for.

Lamb Weston Holdings (LW) on Monday said it plans to appoint four members to its board under a “cooperation agreement” with Jana Partners Management and the Continental Grain Company. Bradley Alford, a former CEO of Nestlé USA, will be named chairman. The parties mutually selected two other potential board members, who will help expand the board from 12 to 13 seats, the release said.

Investors may have envisioned Jana’s involvement leading to a more dramatic outcome. Jana Managing Partner Scott Ostfeld had previously said the “status quo is no longer tenable” and pushed for a complete overhaul at the company. Shares shot higher when Jana’s stake in Lamb Weston was disclosed, underscoring investors’ desire for change, according to a letter Ostfeld sent the Board in December.

Lamb Weston should partner with Jana to “rehabilitate the Company” or “work with its financial advisors to explore a sale,” he said then.

The company’s shares finished Monday down almost 3%. The McDonald’s (MCD) supplier’s shares are off more than 22% so far this year. 

“We are pleased to have reached this collaborative outcome with the Company,” Jana Managing Partner Scott Ostfeld said in a statement today. “I look forward to working with the Board and management to improve performance and deliver shareholder value.”

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