Dive Brief:
- Lamb Weston announced it will add six new board members as part of a settlement with one of its largest shareholders, which has accused the French fry maker of poor oversight
- The frozen potato products maker appointed new members, including former CEOs of Nestlé USA and McCormick & Co. The move is part of an agreement with Jana Partners that gives the activist investor a large presence on the company’s board.
- Lamb Weston has struggled as consumers eat out less in restaurants and curtail their spending in stores due to inflation, reducing demand for the company’s French fries and other potato products.
Dive Insight:
Jana has been pressuring Lamb Weston to make changes to its operations for months, and even explore a sale, since it teamed up with Continental Grain to purchase a stake in the company last fall. The activist group pointed to poor oversight and execution missteps while questioning the company’s decision to appoint an insider as CEO in December.
While the agreement likely means a sale of Lamb Weston is off the table for now, Jana’s influence will be significant at the Idaho-based company. The activist investor prioritized adding board members with food experience, including Bradley Alford, a former Nestlé USA CEO who will become chairman, and ex-McCormick chief Lawrence Kurzius.
Ultimately, Lamb Weston will add four of Jana's proposed director candidates and two others who were mutually agreed upon. The move expands Lamb Weston’s board to 13 members from 11.
"We are pleased to have reached this Agreement with JANA and Continental Grain,” Mike Smith, Lamb Weston’s CEO, said in a statement. “Following our constructive engagement with them and taking into account perspectives gleaned from discussions with additional stockholders, we are confident this outcome is in the best interests of the Company and all of our shareholders."
In a research note, Robert Moskow, an analyst with TD Cowen, was surprised Jana did not attempt to launch a proxy fight to replace the board entirely and bring in a new management team. The agreement, he said, “represents a willingness to work with the legacy board that we did not expect.”
Moskow noted that roughly a third of Lamb Weston's U.S. contracts will come up for renegotiation later this year, which could put pressure on the company due to weak demand for its products. The company lost U.S. customers in 2024 even after 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 time-frame ahead for shareholder value creation,” he said.
Slowing fast-food sales have pressured profits at Lamb Weston, which is a supplier to McDonald's and other major restaurant chains.
Last October, Lamb Weston announced it closed an older, higher-cost processing facility in Connell, Washington, and temporarily curtailed certain production lines and schedules across its North American network. It also planned to cut 4% of its workforce, or roughly 428 jobs, and eliminate unfilled job positions.
