SunOpta Targeted by Activist Engaged Capital With New Stake

  • Activist signed confidentiality pact, held talks with SunOpta
  • Welling’s firm said to see potential for partnerships, sale

SunOpta Inc., the Canadian natural and organic food producer undertaking a strategic review, is being targeted by activist fund Engaged Capital, which disclosed a new 7.5 percent stake.

The hedge fund run by Glenn Welling has signed a confidentiality agreement with SunOpta, according to a 13D filing Thursday. Engaged has held talks with the company since it announced its review on June 26, tackling subjects including the structure of any investment by a strategic partner or financial sponsor, and “potential paths to improving operating performance.’’

The shares closed 7.1 percent higher at $6.98 in New York, giving SunOpta a market capitalization of $597.5 million.

SunOpta focuses on organic, non-genetically modified and specialty foods and ingredients. Earlier this year, the company hired Rothschild Inc. to review its operations after Tourbillon Capital Partners urged the company’s board to explore a sale.

Engaged has entered into a non-disclosure agreement with SunOpta so the company can have the benefit of their advice on how to create shareholder value, Dan Gagnier, a spokesman for SunOpta at Gagnier Communications, said in an e-mailed statement.

‘Constructive Dialogue’

“We believe Engaged will bring a valuable shareholder perspective to the process,” he said. “We look forward to a constructive dialogue with Engaged, as we do all shareholders, as we work to complete our process.”

Engaged earlier campaigned at another specialty foods company, Boulder Brands Inc., which was ultimately sold to Pinnacle Foods Inc. last year. Engaged sees potential for SunOpta to benefit from a strategic partner or financial investor, as well as a potential sale of some or all of the company, according to a person familiar with the talks. SunOpta should focus on the growing demand for its healthy private-label products and supplying non-GMO and organic ingredients to boost earnings, said the person, who declined to be identified because the discussions were private.

The activist also wants to improve the company’s board and management, the person said, citing operational missteps including slow integration of acquisitions and lagging margins in consumer products.

Engaged’s Performance

Engaged typically seeks private talks before beginning a public campaign, and often agitates for the sale of targeted companies. The fund has gained more than 18 percent this year, the person said, boosted by investments where the activist had board representatives. Those include the $1.6 billion sale of Outerwall Inc. to private equity firm Apollo Global Management, and Rovi Corp.’s merger with TiVo Corp.

Welling, a former partner at Relational Investors, formed Newport Beach, California-based Engaged with other Relational managers in 2012, backed by Grosvenor Capital Management. The firm typically wages activist campaigns at small and mid-sized companies.

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