Trian Fund Management, the activist hedge fund headed by Nelson Peltz acquired 42,061,438 shares or 7.08% stake in Sysco based on its 13D filing with the Securities and Exchange Commission (SEC).
Trian Fund investment details
Based on the filing, Trian Fund and its affiliates paid an aggregate price of $841,988,029 for the 22,803,484 shares of Sysco on August 13, around 4:00 in the afternoon.
The activist hedge fund and its affiliates also paid an aggregate strike price of $712,719,181 for the additional 19,255,954 shares of Sysco that were purchased through a series of privately negotiated back-to-back call and put transactions on the same date.
Trian Fund’s total investment in the shares of Sysco is more than $1.55 billion.
Trian Fund believed Sysco is an attractive investment opportunity
Trian Fund acquired a stake in Sysco based on its belief that the company’s shares were undervalued and represented an attractive investment opportunity.
The activist hedge fund engaged in discussions with Sysco President and CEO William Delaney and non-Executive Chairman Jackie Ward regarding issues related to the company’s operations, capital structure, capital allocation, corporate governance and board structure and composition.
Trian Fund expressed its perception that Sysco’s operating and financial performances underperformed relative to its potential despite its competitive advantage.
The activist hedge fund suggested to Delaney and Ward that Sysco “should adopt strategic and operating initiatives to improve operating margins, enhance working capital efficiency.”
Trian Fund also recommended the use of “prudent amount of incremental leverage to increase the amount or capital returned to investors.” It should also take steps to align better the compensation of management with the company’s performance.
Trian Fund intends to engage in further discussions with the senior management and board of directors of Sysco regarding its recommendations and other issues.
Sysco issued a statement indicating that it” welcomes collaborative discussions with investors” who shares its interest in creating value. The company also confirmed its discussions with the activist hedge fund and expected to continue a constructive dialogue.
“We believe Sysco is extremely well positioned to execute our strategy in a manner that will support the success of our customers, profitably grow our business and improve our return on invested capital,” according to the company.
Sysco recently terminated its transaction with US Foods, and approved an additional $3 billion shares buyback over the next two years.
The stock price of Sysco gained 6% to $40.83 per share at the time of this writing, around 2:04 in the afternoon in New York.