Performance Food settles with Sachem Head, hands seat to Ferguson

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By Svea Herbst-Bayliss

NEW YORK (Reuters) -Activist investor Scott Ferguson is joining the board of Performance Food Group, the company said on Tuesday, at a time the hedge fund is urging the food distributor to consider merging with rival US Foods Holding.

Less than five weeks ago, Ferguson’s Sachem Head Capital Management nominated four director candidates to Performance Food’s board. Last week, Performance Food and US Foods signed an agreement to exchange sensitive financial information without violating anti-trust laws. 

If Performance merged with US Foods, the two companies could rival the industry leader Sysco, which has 17% of the market share.

Performance Food’s board will grow by one, to 13 members and Ferguson will join the Audit and Finance Committee. The company said in a regulatory filing that this is where “all proposed M&A transactions and other strategic alternatives are discussed.”

Ferguson would also become a member of any committee that might be created to “evaluate potential strategic alternatives or any other extraordinary transaction,” the company added in the filing.

“This outcome is the result of constructive engagement with Scott and his team and demonstrates our Board’s openness to fresh perspectives,” Performance Food’s CEO George Holm said in a statement. “I look forward to working alongside Scott and the rest of the Board as we continue to grow our business to drive shareholder value.”

Holm had told analysts in August that there was no basis to engage with US Foods about a possible tie-up.

Sachem Head, which built its current position in Performance Food this quarter, is well versed in the food distribution business. It previously owned a stake in US Foods but has exited that position.

From 2022 to 2024, Ferguson served on the board of US Foods, having settled with the company after a bitter board room fight. Late last month Ferguson nominated four directors to Performance Food’s board, suggesting the company should consider a possible tie up with US Foods or find other ways to improve margins.

After consulting with other large shareholders, Performance Food’s mood on a possible deal appears to have shifted, lawyers and bankers said. They added that the so-called “clean team agreement” signed last week could be seen as a possible step to a deal.

Ferguson has served on numerous public company boards, including Olin, Elanco and Autodesk, and is generally considered a thoughtful and helpful director, said lawyers who are familiar with his board service.

Activist investors have been extraordinarily busy in recent weeks after a more tepid second quarter, bankers said. They noted a resurgence in M&A activity has given many activists the courage to pursue fresh targets with demands for board seats and suggestions for companies to put themselves up for sale.

(Reporting by Svea Herbst-Bayliss; Editing by David Gregorio)