Medifast Newest Target of Activist Investor Engaged Capital

Medifast Inc., the weight loss program provider, should grow its health coaching network and accelerate franchising, according to activist investor Engaged Capital LLC.

Engaged, the activist fund founded by Glenn Welling, has amassed a 5.7 percent stake in Medifast, according to a regulatory filing today. Owings Mills, Maryland-based Medifast trades at a 40 percent discount to peers Nutrisystem Inc. and Weight Watchers International Inc., and would be an acquisition target should it continue to languish, Engaged said.

The fund has held talks with Medifast’s management about improving profitability and capital allocation, and intends to continue discussions with both the board and executives, according to the filing. Activist funds generally acquire equity stakes in companies and seek to force changes that boost share values and investor returns.

After rising in early trading, Medifast was unchanged at 9:56 a.m. in New York. The shares have risen 14 percent this year through yesterday’s close.

Welling, a former partner at Relational Investors LLC, formed Newport Beach, California-based Engaged with other Relational managers in 2012, backed by Grosvenor Capital Management LP. Engaged pursues “constructive” activism, working with management to make changes that boost shareholder value, according to its website.

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