March 15, 2022
Good morning, Retail Readers!
🦅 Today, March 15, is Buzzards Day. OK, I know that's not a buzzard emoji but it's the closest I could find, other than a turkey 🦃.
1 big thing: Reading the TreeHouse Foods tea leaves
TreeHouse Foods' update on its strategic review process (featured in yesterday's newsletter) said a lot more about the state of the M&A market than it probably intended.
Why it matters: The private label food company's bearish comment about the macro climate and the financing market points to a growing issue facing deal makers — banks are sitting on loans they can't sell on to investors.
- Translation: It's a bad time to finance an acquisition.
Catch up fast: For more than a year, Jana Partners has pressured TreeHouse Foods to consider several strategic options, including selling the entire company.
- The powerful activist hedge fund has gone so far as to nominate two directors to the company's board in order to pile on that pressure.
Details: TreeHouse officers and advisers surely spent the weekend crafting yesterday's release, stressing over every letter of every sentence, knowing Jana (and others) would likely respond, especially if it's not to their liking.
- And, on the surface, it wasn't. TreeHouse said it's not going to put the company up for sale, but would consider selling certain assets.
- That stance often prompts activists pushing for a sale to step up the pressure, claiming the board is ignoring its fiduciary duty, leaving value on the table, etc, etc.
Yes, but: Jana Partners was mum yesterday.
- Like other M&A pros who live and breathe this kind of thing, Jana no doubt fixated on the feedback from advisers line in the release (Evercore is running the review process):
- "...the feedback cited the impact the macro-economic and financing environment, which has changed significantly since we began the exploration of a sale of the Company..."
Zoom in: The macro change = inflation. The financing change = banks are struggling to syndicate loans.
- The sale of the U.K's Boots business is a case in point, where an auction process that attracted a bunch of buyers pre-Ukraine has now turned cold due to the issues TreeHouse cited.
The bottom line: The environment to pursue a full company sale process is just plain bad for the time being. Jana seems to agree.