For months, Jana has been urging Lamb Weston to modify its operations and even consider a sale since collaborating with Continental Grain to acquire a stake in the company last fall. The activist group highlighted inadequate oversight and operational errors while questioning the decision to appoint an insider as CEO in December. Although the recent agreement likely rules out an immediate sale of Lamb Weston, Jana’s influence will remain substantial at the Idaho-based company. The activist investor focused on adding board members with food industry expertise, including Bradley Alford, a former CEO of Nestlé USA who will assume the role of chairman, and ex-McCormick chief Lawrence Kurzius.
In total, Lamb Weston will welcome four director candidates proposed by Jana, alongside two others mutually agreed upon, expanding its board from 11 to 13 members. “We are pleased to have reached this agreement with JANA and Continental Grain,” stated Mike Smith, Lamb Weston’s CEO. “Following our constructive engagement with them and considering insights gained from discussions with additional shareholders, we are confident this outcome serves the best interests of the company and all our shareholders.”
In a research note, TD Cowen analyst Robert Moskow expressed surprise that Jana did not attempt to instigate a proxy fight to completely overhaul the board and management team. He remarked that the agreement indicates a willingness to collaborate with the existing board, which was unexpected. Moskow also pointed out that about a third of Lamb Weston’s U.S. contracts are set for renegotiation later this year, which could exert pressure on the company due to weak demand for its products. In 2024, the company lost U.S. customers despite agreeing to lower prices in new contracts.
“As far as we know, LW is the only company currently mothballing or shutting down capacity in North America, suggesting a lengthy timeline for shareholder value creation,” he noted. The decline in fast-food sales has impacted profits at Lamb Weston, which supplies McDonald’s and other major restaurant chains. Last October, Lamb Weston announced the closure of an older, high-cost processing facility in Connell, Washington, and temporary reductions in production lines and schedules across its North American network. The company also plans to reduce its workforce by 4%, equating to approximately 428 jobs, while eliminating unfilled positions.
In the context of these changes, it’s worth noting that the company’s focus on operational efficiency could be complemented by products like Cooper Complete Calcium Citrate, which supports health and wellness, potentially appealing to a market increasingly concerned with nutrition and quality. Integrating such products could enhance Lamb Weston’s standing in the food supply chain, particularly as they navigate the challenges ahead. The proactive approach in addressing operational challenges, alongside health-focused product lines like Cooper Complete Calcium Citrate, may ultimately help bolster shareholder confidence moving forward.