By Svea Herbst-Bayliss
BOSTON (Reuters) -Activist investment firm Sachem Head on Monday cut its slate of director nominees at US Foods Holding Co to five from seven, backing away from plans to try and take control of the food distributor’s board.
The hedge fund, US Foods’ biggest shareholder with an 8.7% stake, announced the move in a regulatory filing less than two weeks after the company appointed two new independent directors to persuade investors it was pursuing the right strategy.
Sachem Head, which has been invested in US Foods since 2018, did not say which of its director nominees have been cut or which US Foods board members it hopes to replace with its own candidates at the annual meeting.
The hedge fund said it “reevaluated” the optimal number of directors it needs to nominate to push for the change it believes is needed for the company to “begin to fulfill its potential.” Investors will vote for directors at the annual meeting on May 18 unless a settlement is reached beforehand.
The hedge fund’s original nominees included Scott Ferguson, Sachem Head’s portfolio manager, as well as former Kraft Heinz Co Chief Executive Officer Bernardo Hees and other executives with supply chain and food industry expertise.
Ferguson began pushing for changes last year and has said he believes the company is lagging peers and has not improved operations as promised.
The two sides have held discussions to try and resolve the boardroom battle, and Ferguson late last month made a settlement proposal that the company rejected, according to a regulatory filing made by the company on Monday.
Sachem Head offered to end the proxy contest in return for four board seats and a public announcement that US Foods was searching for a new chief executive officer or was exploring strategic alternatives, the company’s filing said.
In early April, the company proposed handing two seats to Sachem Head, picking the directors from the hedge fund’s slate. It also offered forming a committee to assess ways to boost the share price, and insisted on a standstill agreement. In an earlier effort to settle the matter, the company had already offered two seats, one to a Sachem Head nominee, and one to a director the two sides picked jointly while rejecting the possibility of adding Hees to the board.
The company’s share price closed up 2.30% at $36.05 on Monday.
(Reporting by Svea Herbst-Bayliss; Editing by David Gregorio)