Shares of Lamb Weston Holdings Inc (NYSE:LW) surged as much as 11% in premarket trading Friday after reports that Jana Partners, an activist investor, confirmed it has a roughly 5% stake in the company. Moreover, the activist investor is encouraging the company to consider a sale.
The investment firm spent approximately $336 million to acquire 7,131,339 shares, which includes options for an additional 3,230,400 shares. Jana's acquisition was motivated by their belief that Lamb Weston's shares are currently undervalued and present a compelling investment opportunity.
The activist investor plans to engage with Lamb Weston's board of directors and management to discuss a range of issues.
These include what Jana perceives as self-inflicted errors leading to shareholder underperformance, as well as various core operating deficiencies. Among the identified areas of concern are customer demand planning, raw potato procurement, and the implementation of enterprise resource planning (ERP) systems.
Furthermore, Jana intends to address Lamb Weston's capital expenditure strategy, share repurchase plans, and investor communication practices. They aim to improve transparency, particularly regarding the impact of the company's recent operational missteps on its capacity utilization levels, which Jana believes are lagging behind those of North American peers.
Compensation practices for management will also be scrutinized, with Jana advocating for the inclusion of return on capital targets to discourage growth at any cost.