Company: Performance Food Group (PFGC)
Business: Performance Food Group is simply a nutrient and foodservice organisation institution that operates done 3 segments: foodservice, specialty (formerly "Vistar"), and convenience. Its foodservice conception distributes a enactment of nationalist brands, lawsuit brands, and its proprietary-branded nutrient and food-related products to autarkic and multi-unit concatenation restaurants and different institutions. Its specialty conception specializes successful distributing candy, snacks, beverages, and different items nationally to vending, bureau java service, theater, retail, hospitality, and different channels. Its convenience conception distributes candy, snacks, beverages, cigarettes, different baccy products, nutrient and foodservice related products and different items to convenience stores crossed North America. It markets and distributes implicit 250,000 nutrient and food-related products to customers crossed the United States from astir 144 organisation facilities to implicit 300,000 lawsuit locations successful the food-away-from-home industry.
Stock Market Value: $16.34 cardinal ($104.40 per share)
Activist: Sachem Head Capital Management
Percentage ownership: ~2 - 4%
Average Cost: n/a
Activist Commentary: Sachem Head was founded successful 2013 by Scott Ferguson, the archetypal concern nonrecreational hired astatine Pershing Square, wherever helium worked for 9 years. Sachem Head has a past of coagulated worth investing, but we judge that they truly recovered their activistic stride successful 2020 with their concern successful Olin. Scott Ferguson took a committee spot astatine Olin - the archetypal nationalist institution committee spot helium took successful an concern that was not portion of a radical - and created tremendous worth there. More recently, aft nominating a bulk manager slate, Sachem Head settled for three committee seats astatine US Foods, and astir precocious settled for a committee seat astatine Twilio successful April 2024. Taking committee seats signifies some committedness and publication and this doctrine and benignant is truly paying disconnected for Sachem Head.
What's happening
On Aug. 21, Sachem Head delivered a nomination notice for the pursuing 4 candidates to basal for predetermination to Performance Food Group's Board astatine the 2025 Annual Meeting: Scott D. Ferguson, David A. Toy, R. Chris Kreidler and Karen M. King. Additionally, Sachem Head has urged the institution to research a imaginable concern operation with US Foods and, absent a transaction, further amended margins.
Behind the scenes
Performance Food Group is the 3rd largest foodservice organisation institution successful North America, down Sysco and US Foods, which each unneurotic bid astir 38% marketplace share. The institution operates done 3 segments. The halfway foodservice conception (61.8% of EBITDA) distributes national, customer, and proprietary-branded nutrient and food-related products. Convenience (20.6%) distributes candy, snacks, beverages, cigarettes, and different baccy products to convenience stores. Specialty (17.61%) distributes candy, snacks, beverages and different items to specialty vendors.
On Aug. 21, Sachem Head delivered a information announcement for the pursuing 4 candidates to basal for predetermination to PFG's committee astatine the 2025 Annual Meeting: Scott D. Ferguson (founder and managing spouse of Sachem Head), David A. Toy, R. Chris Kreidler and Karen M. King.
Additionally, Sachem Head has urged PFG to research a imaginable concern operation with US Foods and, absent a transaction, further amended margins.
Ferguson and Toy antecedently served unneurotic connected the US Foods committee arsenic portion of a Sachem Head Cooperation Agreement. At US Foods, Sachem Head helped instal a caller CEO and absorption team, which catalyzed a palmy turnaround for the company. Since Sachem Head filed its 13D astatine US Foods, the company's banal has much than doubled.
The different 2 candidates person conscionable arsenic overmuch experience: Kreidler was the CFO for Sysco for six years and King is an enforcement vice president astatine McDonald's and serves connected the Aramark board. This is an all-star squad of nominees that are good positioned to navigate PFG done operational improvements and a strategical evaluation.
While determination is an accidental to amended operating margins astatine the company, the main catalyst present is the merger with US Foods. The imaginable synergies that could beryllium attained successful specified a operation marque it precise hard to ignore. These synergies are evident from different projected manufacture consolidation, Sysco's 2013 effort to merge with US Foods. Publicly, this woody was projected to present yearly synergies of astatine slightest $600 cardinal wrong 3 to 4 years comparative to US Foods' $826 cardinal of EBITDA astatine the time. In different words, the projected synergies represented much than 70% of US Foods' EBITDA, and the numbers that were thrown astir privately were adjacent larger. This is an bonzer figure, and mostly unsocial to the nutrient organisation scenery and the magnitude of purchasing, logistics and warehouse rationalization synergies that these companies have. Extrapolating these numbers to a US Foods/PFG merger and applying akin levels of synergies utilizing the EBITDA of PFG's foodservice conception ($1.2 billion), which holds astir of the synergistic potential, a merger could beryllium expected to output $800 cardinal to upwards of $1 cardinal successful synergies. Moreover, if determination is anyone who could validate this analysis, it would beryllium Sachem manager nominee Chris Kreidler, who was the CFO of Sysco astatine the time.
However, the Sysco/US Foods woody was yet blocked by the Federal Trade Commission owed to antitrust concerns centered astir a merger of #1 and #2 that would destruct Sysco's lone nationalist competitor. There are a fewer reasons wherefore a merger betwixt US Food and Performance Food Group whitethorn person a antithetic outcome. First, this would beryllium a merger of the 2nd and 3rd largest players, alternatively than archetypal and second; and dissimilar Sysco, PFG is not a nationalist competitor, with small to nary footprint connected the West Coast. Additionally, today's regulatory situation nether the Trump medication is importantly much favorable than it was erstwhile the Sysco woody was reviewed nether the Obama administration. While immoderate approved woody would apt necessitate divestitures successful definite markets and determination is nary warrant of an approval, with imaginable synergies similar this, the Board owes it to its shareholders to astatine slightest research the anticipation of a US Food merger. And that is each Sachem Head is asking. They are not forcing the institution to merchantability but alternatively pleading with them to measure this perchance lucrative accidental that has been brought to them.
In July 2025, US Foods confirmed successful an 8-K filing that they had approached PFG astir a imaginable combination. But it takes 2 to tango and, truthful far, PFG has not meaningfully engaged with them. Given this existent sentiment, sincere information of this transaction appears improbable to hap without asserting a small unit connected the board, and Sachem Head is doing that successful the signifier of a threatened proxy combat that they would person an fantabulous accidental of winning. Not lone are proxy fights astir the powerfulness of the argument, and Sachem Head has a large 1 here, but the company's shareholder basal contains galore alternate plus managers that are much apt to enactment an activistic docket similar this than the accepted scale funds. These shareholders person a past of being receptive to bully activistic campaigns and the imaginable upside this program could present and would besides beryllium impressed by the beardown slate Sachem Head is nominating should beryllium capable for them to perceive the money out.
Moreover, determination is speculation that adjacent anterior to Sachem Head's engagement, changes successful the C-Suite were imminent. For much than 17 years, the institution has been tally by CEO George Holm, a wide respected manufacture leader. Now, it has been rumored that Holm volition soon measurement down, apt to beryllium replaced by the company's President Scott E. McPherson. A CEO modulation similar this creates the cleanable clip for a strategical transaction for everyone involved, but possibly McPherson. When 2 companies of akin size merge successful a merger of equals, valuation is often the casual part. It is the societal issues that are often the dealbreakers. And that dynamic could beryllium exacerbated erstwhile the merger is projected conscionable arsenic the sitting president is yet getting the telephone up to CEO. However, McPherson hasn't been a PFG lifer and has lone been with the institution for a twelvemonth and a half, truthful the societal issues surrounding enactment of the surviving entity should beryllium achievable.
Boards and their advisors and definite shareholders often viscerally reason immoderate benignant of "sell the company" activism, and often for bully reason. Often, we are the biggest critics of that benignant of short-term activism that gives the aboriginal worth instauration to a backstage equity money oregon a strategical acquirer alternatively of the shareholders. But a "merge the companies" thesis is different, particularly erstwhile determination are specified compelling synergies that make worth for each shareholders. A transaction betwixt players of this size would person to travel chiefly successful the signifier of a stock-based combination, which would let PFG and US Foods shareholders to enactment successful the semipermanent worth instauration that would originate from the merger.
We expect that an experienced activistic similar Sachem Head volition beryllium capable to person the committee of this and a large result for shareholders would beryllium a colony to adhd 2 to 3 directors to the committee on with the constitution of a caller committee focused connected evaluating strategical alternatives with astatine slightest 1 of the caller directors connected that committee. That could pb to a transaction that could beryllium a windfall for everyone involved.
But if yet an valuation is done and a standalone way is determined to beryllium the champion outcome, this remains a beardown institution and a precocious instrumentality connected superior concern with country to amended connected costs and margins astir the edges – areas which Sachem Head's directors would besides beryllium valuable.
Ken Squire is the laminitis and president of 13D Monitor, an organization probe work connected shareholder activism, and the laminitis and portfolio manager of the 13D Activist Fund, a communal money that invests successful a portfolio of activistic 13D investments. Performance Food Group is owned successful the fund.
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