2018 has been a good year for Engaged Capital to clear some room in its portfolio.
CIO Of One Of The World’s Most Successful Hedge Funds Presents His Top Long And Short
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The circa $900 million West Coast activist, led by Glenn Welling, had already made hay earlier in the summer from the sale of Rent-A-Center and now, after four years of activism, Jamba Juice has announced that it is selling itself.
Engaged already had a couple of settlements to its name when it announced a position in Texas-based Jamba Juice in mid-2014. At the time, the stock was trading at around $11 and owned 258 stores outright, alongside nearly 600 franchised stores.
What happened next is a good case study for an activist turnaround, particularly in the fast food industry. Welling and another activist, JCP Investment Management’s James Pappas, settled for a board seat each the following January and set to work divesting company-owned stores with the proceeds going to share repurchases. CEO change followed soon after.
The immediate impact of those reforms wasn’t great. Revenues halved as the number of owned stores declined but costs took until last year to come under control. Even though the share count has fallen nearly 9%, continued losses meant a smaller coterie of shareholders shouldering the burden. The stock bottomed out at nearly $7 in mid-2017.
That makes Roark Capital’s $200 million buyout a godsend, although Engaged Capital’s approximately 18% stake suggested it was unlikely to rely on the liquidity of the market to exit the stock. At $13 per share, it gives Engaged and JCP a profit to show for their years in the boardroom and a decent premium for recent investors. Nor is it a million miles from the stock’s short-lived all-time high of $18 in 2010. Buybacks probably helped boost the price for longstanding shareholders, while a private equity sponsor will help Jamba Juice strip out head office and listing costs.
Roark, which bought Buffalo Wild Wings last year after a proxy fight with Marcato Capital Management, is combining Jamba Juice with Focus Brands, owner of some of the most pervasive airport food options. Hopefully good news for the health-conscious traveler.
ValueAct Capital Partners’ Spring Master Fund notched another board seat this week, with Unifi appointing former investment banker and current ValueAct employee Eva Zlotnicka to the board. With the textile manufacturer citing Zlotnicka’s experience in sustainable investment, expect to see her name connected with more of the activist’s environmentally or socially charged positions.
Quote of the week comes from Cevian Capital’s founding partner Lars Förberg, who ramped up the activist’s demand for ThyssenKrupp to consider a radical restructuring of its operating divisions and in doing so plant a big flag for activism in Germany, following another profit warning from the industrial behemoth.
"Other German companies such as Bayer, Siemens, Continental and Daimler are adjusting their way to manage and operate their businesses and become more focused, entrepreneurial and nimble," Forberg told the Financial Times. "We see no reason why ThyssenKrupp should not explore the same opportunities to strengthen its business."
Article by Activist Insight