Sysco shares have gained 8 per cent in stock price after the announcement that Trian Partners will purchase a stake in the company, according to a CNBC report
Trian Partners, founded by businessman Nelson Peltz, is said to have bought on Friday a 7 per cent stake in Sysco, or 42 million shares, for which it paid about $1.6 billion. This makes Trian the largest individual shareholder in the food services company. Sources related to the deal claim that Trian will also seek to gain representation in Sysco’s board, but at the moment it is unclear if CEO Nelson Peltz himself will apply or if there will be other representatives.
Following the report, Sysco stock prices rocketed up by almost 8 per cent on Friday compared to when trading hours closed on Thursday. This mirrors the company’s progress over the past five years. Sysco has not confirmed the transaction but said that it has engaged talks with Trian and that it expects a “constructive dialogue” in an e-mail statement sent to the media.
In the administrative filing sent with the purchase, Trian wrote that Sysco has underperformed financially when measured against its potential (Sysco’s 8 per cent improvement since 2010 is under the food distribution’s industry 12 per cent national average). The company said that Sysco should improve on its revenue by improving operating margins, investing more efficiently in its workforce and also to roll its management according to its corporate performance.
“We believe Sysco is extremely well positioned to execute our strategy in a manner that will support the success of our customers, profitably grow our business and improve our return on invested capital As we noted in our most recent earnings announcement, we look forward to providing additional details regarding our strategic initiatives during our Investor Day on September 15, 2015”, is said in the filing.
This might be just the thing to turn around Sysco’s fortunes, after a previous announced merger with US Foods was blocked by regulators in June – making Sysco pay a $300 million break-up fee to US Foods. An exact agreement over Trian’s involvement should be reached until next Friday, when the board nomination window closes according to Sysco’s fiscal calendar. Even though an agreement seems probable, the whole situation could also result in a proxy war adding to Sysco’s woes, or to the extension of the board nomination window.
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