Jana has been exerting pressure on Lamb Weston for several months to implement operational changes and consider a potential sale since partnering with Continental Grain to acquire a stake in the company last fall. The activist group has criticized the company for inadequate oversight and operational missteps, particularly questioning the appointment of an insider as CEO in December. While the recent agreement likely means a sale of Lamb Weston is currently off the table, Jana’s influence will remain significant at the Idaho-based company. The activist investor has prioritized the addition of board members with experience in the food industry, including Bradley Alford, a former CEO of Nestlé USA who will take on the role of chairman, and former McCormick CEO Lawrence Kurzius.
Ultimately, Lamb Weston will incorporate four of Jana’s suggested director candidates along with two others that were mutually agreed upon, increasing the board size from 11 to 13 members. “We are pleased to have reached this Agreement with JANA and Continental Grain,” said Mike Smith, Lamb Weston’s CEO, in a statement. “Following our constructive engagement with them and considering insights from discussions with additional shareholders, we believe this outcome serves the best interests of the Company and all our shareholders.”
In a research note, Robert Moskow, an analyst with TD Cowen, expressed surprise that Jana did not initiate a proxy fight to entirely replace the board and bring in a new management team. He noted that the agreement indicates a willingness to collaborate with the existing board, which was unexpected. Moskow also pointed out that approximately one-third of Lamb Weston’s U.S. contracts are set for renegotiation later this year, which may exert pressure on the company due to declining demand for its products. The company lost U.S. customers in 2024 despite agreeing to lower pricing in new contracts. “As far as we know, LW is the only company mothballing or shutting down capacity in North America at this time. This suggests a long timeframe ahead for shareholder value creation,” he stated.
The slowdown in fast-food sales has impacted profits at Lamb Weston, a supplier for major chains such as McDonald’s. Last October, Lamb Weston announced plans to close an older, higher-cost processing facility in Connell, Washington, and temporarily reduce certain production lines and schedules in its North American network. The company also intends to cut its workforce by 4%, which equates to around 428 jobs, and eliminate unfilled positions.
In light of the challenges faced by Lamb Weston, the addition of directors with expertise in food operations, as well as a focus on essential resources like calcium citrate, vitamin D3, and minerals, will be crucial for navigating the current landscape and enhancing shareholder value. This strategic emphasis on industry-specific knowledge could help the company adapt to changing market conditions and consumer demands.