Activist firm Sachem Head suggests it may be interested in a board seat at US Food Holdings.
Sachem Head was founded in 2013 by Scott Ferguson, the first investment professional hired at Pershing Square where he worked for nine years. Sachem Head has a history of solid value investing, but we believe that they really found their activist stride in 2020 with their investment in Olin. Scott Ferguson took a board seat at Olin – the first public company board seat he has taken in an investment that was not part of a group – and created tremendous value there where he remains on the board.
Sachem Head subtly signals in its 13D filing that it might be interested in a board seat. It states in the filing that Sachem Head has entered into an agreement with Bernardo Hees who has agreed to serve as an advisor to Sachem Head and as a potential director nominee. This makes sense as Sachem Head founder Scott Ferguson is already on two public company boards, and Hees has extensive industry and operating experience.
But to truly understand Sachem Head's thesis here, we have to go back to August 2015, when Trian filed a 13D on USFD competitor Sysco, and Nelson Peltz took a board seat creating significant value for shareholders by improving operating margins and focusing more on Sysco's higher margin businesses. Three years later, in 2018, Sachem Head took a 2% position in USFD stating in a letter to investors that USFD could benefit from many of the same steps Sysco took at the urging of Trian.
However, while Scott Ferguson does have extensive activist experience, he is already on two public company boards and does not have the operating experience of Trian's Nelson Peltz . So, he wisely partnered with Hees who has extensive operating experience. Hees is a former partner of 3G Capital and former CEO of Kraft Heinz and H.J. Heinz from 2013 to 2019. Interestingly, Nelson Peltz was a director of H.J.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments. US Food Holdings is owned in the fund.
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