US: Trian Group pushes for board representation
The Trian Fund and Sandell Asset Management, activist investors led by billionaire Nelson Peltz, have issued a stinging attack on the current management of Heinz in response to the company's plan to restructure its operations. Despite Heinz's attempt to placate shareholders by increasing returns, focusing its portfolio and cutting costs, the group confirmed its determination to elect five of its nominees to the 12-member Heinz board of directors.
Trian suggested the company's Superior Value and Growth Plan, released yesterday (1 June), was yet another empty promise from the company, the sixth such program that Heinz's board has announced since 1997.
"Despite the five [previous] plans and their respective promises, Heinz's total shareholder returns have almost uniformly underperformed those of both the broader market and the consumer packaged food universe since the current management team began leading the Company in April 1998. In fact, total shareholder returns at Heinz have been negative over this timeframe (-10.8%) versus 54.6% and 26.4% for the Mid-Cap Food Index and Large-Cap Food Index, respectively," Peltz's Trian said in a statement.
The investor group stated its belief that "the fundamental issue at Heinz today is management accountability - specifically, the current management team's inability to deliver on its plans and promises to date."
Trian said that if management had successfully executed its five previous plans the company would now have sales of US$14bn to $15bn, would have achieved approximately $490m in cost savings, and would be delivering EPS of between $4 and $5. In contrast, yesterday Heinz reported FY2006 sales of $8,6bn and ESP of $2.10, down from $2.21 in 2005 fiscal year.
The group highlighted the similarities between the plan unveiled by Heinz and the measures that the group called for last week (23 May). Both call for cost cuts, an increased marketing spend, reduced retail allowances, increased share repurchases and higher dividends. "The major difference is that the Heinz plan sets lower performance goals for the company and does not consider additional non-core divestitures," Trian said.
Trian expressed its dissatisfaction with Heinz's current leadership, reiterated its intention to conduct a proxy solicitation at the upcoming AGM and called on shareholders to elect its nominees to the board of directors.
The Trian Group's five Director nominees are: Nelson Peltz, Peter W. May, Edward P. Garden, Greg Norman and Michael F. Weinstein.
According to notices filed with the New York Stock Exchange, Heinz's next annual meeting is to be held on 16 August.
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