The Morning Brief: JANA Targets Whole Foods in New Campaign

April 11, 2017   Stephen Taub


The hedge fund firm says the upscale grocer’s stock is undervalued — and it’s prepared to launch a proxy fight if management won’t cooperate.

JANA Partners has gone public with a new activist target. The hedge fund firm headed by Barry Rosenstein disclosed it owns 8.3 percent of Whole Foods, the gourmet supermarket chain with a reputation for extravagantly high prices. In a fresh 13D filing, JANA says the stock is undervalued and represents an attractive investment opportunity and threatened to launch a proxy fight if necessary.

"JANA has substantial experience analyzing and investing in the grocery sector and more broadly across the food and retail sectors," the filing states. JANA has also teamed up with several other individuals it asserts "possess significant operational, financial and nutritional expertise." Altogether the group owns nearly 9 percent of the shares.

In the filing JANA said its plans to discuss a number of things with Whole Foods, including changing the company’s board and senior management composition, addressing governance issues and its "chronic underperformance for shareholders," optimizing the company’s real estate and capital allocation strategies, and pursuing opportunities to improve performance. Shares of Whole Goods surged 10 percent, to $34.17, on the news.

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Marcato Capital Management is turning up the heat on Rent-A-Center, which is already the target of activist investor Engaged Capital. Marcato, San Francisco-based activist hedge fund firm headed by Mick McGuire III, fired off a letter on Monday to the board of directors of the company, which rents furniture, computers, electronics, and other items to consumers, following its announcement Monday that it named Mark Speese chief executive officer. The company’s founder is currently the chairman and has served as interim CEO since January 9. The company also Monday announced what it calls a strategic plan designed to boost the company’s growth, profitability and stock price, defying calls to sell the company outright.

Marcato, which owns 4.9 percent of the stock, called on the company to review all strategic alternatives, including a sale of the entire company, which Engaged Capital had proposed in February. In the letter, Marcato points out the company’s return to shareholders eroded by 72 percent in the last 2-and-a-quarter years and it has trailed its closest competitor over a variety of periods going back 10 years.

"If the Board continues to resist a process to review strategic alternatives now, Marcato plans to vote for Engaged Capital’s director nominees at the upcoming annual meeting," Marcato states in the letter.

Shares of Rent-A-Center rose more than 7 percent on Monday, to close at $10.29. It is up 29 percent since Engaged went public with its activist campaign in February.

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Eminence Capital’s Ricky Sandler decided not to stand for election to the board of directors of Tailored Brands less than one month after the hedge fund manager and men’s clothing retailer agreed to this arrangement. In a regulatory filing, Sandler, whose firm owns 14.9 percent of the shares, explained his change of heart, citing "significant demands on his time relating to Eminence’s other portfolio investments and his executive obligations." He also stresses the decision "was not related to any disagreement or dispute" with the company. In March the board of directors of Tailored Brands agreed to nominate Sandler to its board at the company’s upcoming annual meeting.

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Indian e-commerce giant Flipkart raised $1.4 billion from three major firms: Tencent, eBay, and Microsoft. The company is an important holding of Tiger Global Management’s private equity business. In fact, earlier this year Kalyan Krishnamurthy, a former Tiger Global managing director, was named chief executive as part of a wider restructuring.


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