Freshpet has come below the scrutiny of activist investor Jana Companions, which has taken a ten% stake within the US enterprise with a view to a possible sale.
Jana Companions has acquired greater than 4.5m shares within the Nasdaq-listed pet-food maker equating to a 9.6% curiosity valued round US$188m, in response to a submitting with the US Securities and Trade Fee on 12 September.
The investor acknowledged within the doc it considers the “shares are undervalued and characterize a sexy funding alternative”. These shares ended the buying and selling session yesterday (22 September) at $45.47, lower than half the worth initially of the 12 months.
Whereas New Jersey-based Freshpet reported a 34% enhance in gross sales final 12 months to $425.5m, the corporate posted a internet lack of $29.7m, wider than a $3.2m loss within the earlier 12 months. The losses have continued by way of the primary six months of the brand new fiscal interval however at a sooner clip.
Jana Companions stated it plans to enter discussions with Freshpet’s board to guage the “strategic worth in a sale” with a view to “capitalizing on curiosity within the class of considerably bigger gamers with decrease prices of capital, robust operational capabilities, international footprints and better scale”.
It doesn’t, nonetheless, plan to take a controlling share within the enterprise or pursue an “extraordinary transaction similar to a merger”. Nevertheless, Jana Companions stated it reserves the correct to “suggest” new administrators to the board.
Simply Meals has approached Freshpet for remark right this moment outdoors of US enterprise hours.
An identical situation performed out this 12 months at US private-label provider TreeHouse Meals when a Jana consultant secured a board seat. The investor took an preliminary curiosity in that enterprise in 2021, earlier than rising the stake to 9.2%.
TreeHouse went on to launch a evaluation, together with choices for a piecemeal or wholesale disposal of the enterprise. That culminated within the sale of a “significant slice” of the US agency’s meal-preparation arm in August to European funding group Investindustrial.
Earlier this month, Freshpet noticed the departure of finance chief Heather Pomerantz, who stepped down on 7 September “to pursue different alternatives”. Former CFO and present vice chairman Dick Kassar has stepped in on an interim foundation.
CEO Billy Cyr famous on the time: “The fast progress of our enterprise, coupled with a fluid working surroundings, has created a singular set of alternatives and challenges over the previous two years. We stay dedicated to assembly our aims and are making some focused investments to cut back volatility and set up a good better set of capabilities to make sure that we ship the worthwhile progress that we imagine is inherent on this enterprise.”
Freshpet produces chilled cat and canine meals utilizing pure elements bought by way of retail – mass, grocery and membership shops, pure meals channels and specialty pet shops – within the US. It additionally exports to Canada and Europe, and sells on-line by way of its web site.
In August, the corporate reported outcomes for the six months to 30 June. Gross sales climbed 37.7% to $278.2m, pushed by “velocity, pricing, distribution features and innovation”.
However internet losses widened to $38.1m, exceeding final 12 months’s $29.7m, and the $18.4m loss a 12 months earlier. Adjusted EBITDA dropped to $9m from $18.6m, with the margin falling to three.2% from 9.2%.
Steerage for 2022 is for gross sales to rise by round 35% to $575m, whereas Freshpet expects EBITDA to climb 12% to $48m, “closely” skewed to the fourth quarter.
See Simply Meals’s deal evaluation: Pet meals is “scorching” for meals trade deal-making in 2022 – M&A advisers