Jana Partners Acquires Stake in Lamb Weston

Activist investor Jana Partners has acquired a stake of approximately 5% in Lamb Weston, aiming to pressure the frozen potato product maker to consider a potential sale, as reported by The Wall Street Journal on Friday.

Share Price Reaction

Lamb Weston shares rose by over 7% in premarket trading following this news.

Operational Improvements

Alongside Continental Grain, Jana Partners is expected to advocate for operational enhancements and adjustments to Lamb Weston's capital-allocation strategy. They may also nominate new board members, including Timothy McLevish, Lamb Weston's former executive chairman, and other industry veterans such as Joseph Scalzo, Diane Dietz, Brad Alford, and John Gainor. However, the nomination window does not open until mid-2025.

Company Background

Based in Eagle, Idaho, Lamb Weston is the largest producer of french fries in North America, valued at approximately $10 billion, and serves major customers like McDonald's and Yum Brands (owner of KFC).

Recent Challenges

Despite its market position, Lamb Weston’s share price has dropped over 34% this year, attributed to decreased restaurant demand amid rising menu prices, while the S&P 500 index has increased by over 22% in the same timeframe.

Lamb Weston experienced a significant sell-off in July after reporting quarterly sales and profits that fell short of analysts' expectations, described by JPMorgan analysts as one of the worst days for a large-cap food producer in modern history.

The company has since announced various cost-cutting measures, including closing a processing facility, reducing production temporarily, and laying off workers.

Jana Partners’ investment aligns with their strategy of pushing food companies toward deals, previously advocating for acquisitions in companies like Freshpet and Whole Foods, which was acquired by Amazon in 2017. Jana also urged Conagra to spin off Lamb Weston back in 2016, believing it could attract interest from larger food companies.