- Hain Celestial will nominate six new directors and three board members won’t run for re-election as part of a deal reached with activist investor Engaged Capital, the company said in a statement. The new board will comprise 11 members, all but one of them independent.
- The organic and natural products maker also has agreed to form a group of directors that will examine strategic alternatives, according to The Wall Street Journal. In addition, the paper said Centerview Partners will help with the review, which could potentially result in a full or partial sale of the company.
- Engaged Capital took a 9.9% stake in Hain this summer to help reinvigorate the company's top line growth and bring its margins more in line with its peers.
Hain Celestial has long been identified as a potential takeover target, but its erratic performance and the audit of its accounting discrepancies — it announced in June it would not revise any of its previous financial statements — have cast doubt on its future. Engaged Capital, which has a record of success in prior activist efforts at other companies, took a nearly 10% stake in Hain earlier this year.
"We are pleased to have been able to work so constructively with Irwin Simon and members of the board on this important step toward enhancing value creation for all shareholders," Glenn Welling, founder and chief investment officer of Engaged Capital, said in the company statement. "The board will benefit from the infusion of skills and experience in consumer packaged goods, grocery and retail, operations, and capital allocation."
Welling would be one of the new directors added to the board as part of the overhaul announced Thursday.
The food and grocery space has been attractive lately to investors eager to lower costs, improve margins and increase share prices. Whole Foods was sold for $13.7 billion to Amazon after Jana Partners purchased an 8.2% stake in the company and urged the struggling natural and organic retailer to explore a sale. Nestle and Danone also have had their shares purchased by activist investors who have called for changes.
Despite its struggles, Hain remains in a popular space as consumer interest in natural and organic products shows no sign of abating. Founded in 1993, Hain has acquired more than 55 brands, including BluePrint juice, Celestial teas and Garden of Eatin snacks.
What's interesting about Thursday's announcement is that Hain will reportedly have a group of directors look at the future of the company. They are likely to consider a sale as part of the review. Major food manufacturers, which have struggled as consumers shun processed items in favor of fresher, organic and natural products, could bulk up their offerings in this space by purchasing Hain.
Many companies already have made moves to improve their brand lineup, and a purchase of Hain, with its roster of well-known brands, would be an opportunity that many would be reluctant to pass up. Large companies have recently acquired smaller manufacturers in the natural and organic space. Campbell Soup announced in July it would spend $700 million to purchase natural and organic brand Pacific Foods of Oregon. Conagra Brands announced it would acquire Angie's Artisan treats, the maker of Angie's Boomchickapop popcorn, last week.
With a market cap of $4.5 billion, Hain would be an acquisition that these and many other much larger food and beverage manufacturers could easily digest.