JANA Seeks Change at Lamb Weston, Highlighting Performance Issues
Lamb Weston Holdings, Inc. (NYSE:LW) has faced a call for comprehensive changes in its board and leadership from its significant shareholder, JANA Partners. In a letter released on Monday, the activist investor group demanded changes to enhance shareholder value and suggested that Lamb Weston should consider a sale if these changes are not implemented.
The group, which owns over 5% of Lamb Weston shares, expressed its frustration with the company's recent performance. JANA highlighted Lamb Weston’s underperformance compared to the S&P 500 and its peers over the last five years and described the recent weak earnings report for 2024 as one of the worst for a large-scale food producer.
JANA's letter pointed out several areas where it believes Lamb Weston leadership has failed. These include alleged financial and operational issues that have led to approximately $400 million in EBITDA losses over the past two and a half years. The investor criticized the company for mistakes in customer relations, inaccurate forecasts, a problematic ERP project, and product quality issues that have resulted in significant financial losses and damage to Lamb Weston’s reputation.
The activist investor also criticized Lamb Weston’s capital allocation and executive compensation practices, arguing that they are not aligned with shareholder interests. JANA expressed concerns about dubious capital expenditures, disappointing buybacks prior to earnings reports, and executive compensation targets that do not match the company’s actual performance.
Additional concerns were raised regarding the use and transparency of Lamb Weston’s aviation assets. JANA's review of flight records raised questions about the business use of the company’s corporate aircraft.
This call for change comes in the wake of reports last week that Post Holdings (NYSE: POST) is in discussions with bankers to consider acquiring Lamb Weston. It was noted that JANA's disclosure of its stake in the company on October 18, 2024, resulted in a $1 billion increase in Lamb Weston’s market value, signaling the market's interest in a new direction for the company.
The letter concluded with JANA offering to collaborate with Lamb Weston’s Board of Directors to implement changes and improve company performance. However, the investor group warned that if the Board is reluctant to make significant changes, Lamb Weston should explore a sale to provide the best return for its shareholders.