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US Foods sets stage for proxy fight with activist Sachem Head

Michael Flaherty
Apr 18, 2022
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Photo: Artur Widak/NurPhoto via Getty Images

US Foods, one of the nation's biggest foodservice distributors, is out with a fight letter this morning aimed at the activist hedge fund trying to shake up the company's board and strategic plan.

Why it matters: The future direction of the $8.2 billion business hinges on the May 18 AGM vote, where shareholders will decide whether to stick with its board or bring in new directors from the activist's slate.

Driving the news: Sachem Head Capital, founded by Pershing Square alumnus Scott Ferguson, has nominated five directors to serve on the company's board.

  • Sachem Head (8.7% holder) originally sought control of the board with seven nominees. Last week, it cut its slate to five.
  • Trimming to a minority slate from a majority is a common move in the weeks ahead of a vote, as proxy advisors tend to be less sympathetic to an activist seeking an overthrow.

Of note: The retail sector and its affiliate branches are heavy with proxy fights at the moment (Kohl's, Big Lots, Hasbro, while Dollar Tree just settled with its activist).

  • Sachem Head is focused on both improving operations and the potential sale of the company, filings show.
  • If Sachem Head does get inside the boardroom, surely some kind of M&A-focused move could eventually come into focus.

The bottom line: US Foods recognizes at the top of its letter today that it has previously failed to meet its own expectations in the past. The company says it's on the right path now and warns that Sachem Head's nominees will be focused only on cost cuts.

  • Investors will decide whether new faces are needed on the board.

Editor’s note: This item was updated to include the additional demand by Sachem Head of exploring the potential sale of the company.

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