JANA Partners has identified a new activist target.
The hedge fund firm headed by Barry Rosenstein on Wednesday disclosed that it owns 7.3 percent of TreeHouse Foods, a food processing company that specializes in the private label market.
In the 13D filing, the activist investor said it had nominated three individuals to the board and may urge the company to put itself up for sale.
Shares of TreeHouse surged about 20 percent on Wednesday to around $50 per share. The stock is still trading at roughly half the price of its July 2016 peak.
JANA declined to comment.
The timing of the filing was possibly strategic, coming several days before JANA is required to file its 13F filing detailing the firm’s positions as of December 31, 2020.
According to the 13D, JANA began building its position on December 15 and continued buying the stock through February 9, paying roughly $40 to $44 per share.
JANA said it told the company on January 29 that it was nominating three individuals to the board of directors: Meredith Adler, John Gainor Jr., and Charles Myers, all of whom purchased TreeHouse stock, according to the filing.
Myers shelled out more than $3 million for his 75,000 shares, while Gainor purchased $506,000 in shares and Adler bought $49,000 worth of stock, according to the filing. JANA said it paid each of the three individuals $90,000, with the promise of an additional $175,000 if they are elected or appointed to the board.
In the filing, JANA asserted that the TreeHouse shares are undervalued and are an attractive investment opportunity “nearly three years into a comprehensive turnaround” for the company.
JANA also said that it has had, and intends to continue having, “constructive discussions” with the company’s board and management about ways to “resolve” the company’s undervaluation and total stockholder return.
This includes possibly selling the company, as well as actions related to operations, capital allocation, corporate governance, and compensation practices, according to the filing.
JANA has industry knowledge from previous investments in Conagra, Pinnacle Foods, Whole Foods, Safeway, and others. However, the TreeHouse investment seems closer to the hedge fund firm’s recent investment in Perspecta, which JANA deemed a broken equity situation that could realize more value in a sale than in the public markets, according to a person familiar with the firm’s thinking.
Perspecta, a government services provider, recently agreed to be acquired by Peraton, a portfolio company of private investment firm Veritas Capital, for $7.1 billion in an all-cash deal, as Institutional Investor previously reported. JANA had previously filed an initial 13D disclosing it owned 5.9 percent of Perspecta. It eventually became the fourth largest shareholder.
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In response to Wednesday’s filing, Wells Fargo analysts said that the JANA stake in TreeHouse “reinforces robust structural risk/reward.” The analysts pointed out the investment came three years into a turnaround in which the company has “significantly refocused” by shutting down and/or selling underperforming product lines and businesses.
“Restructuring efforts are now leading to best-in-class service levels, structural improvements/low-profit business exits, and shared services capabilities that were historically lacking,” they added in the report obtained by II. “Such elements should drive new business wins from smaller operators and capacity-constrained competitors that capture market share gains within private label and a return to volume growth in 2021and beyond.”
TreeHouse was also one of the “Sweet 16” stocks identified by Jefferies in a January 28 report, which identified stocks held by hedge funds that were net short, lacked liquidity, and could see outsized moves.
TreeHouse did not immediately respond to a request to comment.
