Sysco Corp. rose the most in 20 months after activist Trian Fund Management disclosed a 7.1 percent stake in the food-distribution company and said it may seek representation on the board.
Sysco climbed 7.4 percent to close at $41.38 in New York, the biggest gain since December 2013. Shares in the company, which supplies food to school cafeterias, restaurants and hotels, are now up 4.3 percent this year.
Trian, co-founded by billionaire Nelson Peltz, has held talks with Sysco’s Chief Executive Officer William Delaney and Chairman Jackie Ward about operations, capital structure, capital allocation, corporate governance and potential board seats, the activist said today in a 13D regulatory filing.
Sysco in June terminated its planned $3.5 billion takeover of US Foods Inc. after a federal judge blocked the combination, and added $3 billion to its stock-buyback program. Trian has a fondness for food and beverage giants, having earlier tussled with PepsiCo Inc., Mondelez International Inc., Kraft Foods Inc., H.J. Heinz Co. and Wendy’s Co., among others.
Sysco has underperformed its potential and “should adopt strategic and operating initiatives to improve operating margins, enhance working capital efficiency, consider the use of prudent amounts of incremental leverage to increase the amount of capital returned to shareholders, and take steps to better align management compensation with corporate performance,” Trian said.
Sysco is aware that Trian has taken a stake and has had some “very brief” discussions with the fund, said Charley Wilson, a spokesman for the food distributor.
The Houston-based company is “staying the course” on its strategy and will continue to work to drive long-term shareholder value, Wilson said. Sysco won’t speculate on Trian’s intentions or future actions, he said.
“We welcome collaborative discussions with investors who share our interest in creating value by marketing and delivering great products to our customers,” Wilson said.
Trian declined to comment beyond today’s filing.
The firm, founded by Peltz with partners Peter May and Ed Garden in 2005, manages more than $10 billion and focuses its activist investments on consumer, industrial and financial companies -- in particular conglomerates.
The partnership began in the 1970s when May became chief financial officer of a regional food distributor controlled by Peltz. Over decades the pair built a packaging giant, a fast-food restaurant company and a beverage corporation that acquired Snapple and was ultimately sold to Cadbury Schweppes. Garden joined the pair in 2003, redirecting focus to activist investing as an asset manager.
New York-based Trian suffered its first proxy-fight loss at DuPont Co. in May, after shareholders of the chemical maker rejected the firm’s bid for four directorships. It’s only earlier proxy fight was a win at Heinz in 2006.