Jana Partners, a prominent investment firm founded by Barry Rosenstein, and a significant shareholder in Lamb Weston Holdings, Inc. (NYSE: LW), has publicly expressed its deep concerns regarding the company’s ongoing underperformance. Owning more than 5% of Lamb Weston, JANA Partners has issued a formal letter to the Lamb Weston Board of Directors, signaling a strong demand for immediate and substantial changes in leadership and strategic direction. This move comes after what JANA describes as years of “systemic failures” and a perceived detachment of the Board from the critical need for transformation at Lamb Weston.
The catalyst for this decisive action was Lamb Weston’s recent earnings report on December 19, 2024, which JANA Partners views as further evidence of the urgent need for a complete overhaul. The report included a significant downward revision of fiscal year 2025 guidance, marking yet another in a series of cuts. This news triggered a sharp 20% drop in Lamb Weston’s stock price, pushing it close to its 52-week low.
JANA Partners criticizes the Board’s response to shareholder pressure, specifically the appointment of the Chief Operating Officer, a long-term Lamb Weston executive, as the new CEO. They argue that this decision, replacing the CEO with his “right hand,” indicates a failure to recognize the depth of change required and represents a continuation of the status quo. Furthermore, JANA challenges the Board’s explanations for Lamb Weston’s underperformance, particularly the blaming of competitor capacity additions for current volume declines, which JANA finds disingenuous given Lamb Weston’s own strategic decisions and investments.
Image: Jana Partners’ official letter to the Lamb Weston Board of Directors, dated January 27, 2025, outlining concerns over company performance and advocating for leadership changes.
The market reaction to Lamb Weston’s earnings report and the Board’s response has been overwhelmingly negative. Analyst reports cited by JANA reflect a sharp decline in confidence in Lamb Weston’s management and oversight, suggesting that strategic change is increasingly likely and necessary.
To gauge shareholder sentiment, JANA Partners conducted an independent study, gathering feedback from approximately 70% of Lamb Weston’s top 70 shareholders. The results revealed widespread frustration and a profound lack of confidence in the current Board and leadership. The study highlighted extremely weak ratings across key areas such as leadership, operational execution, and capital allocation. Interestingly, product quality received a near-perfect score, underscoring the significant potential being squandered due to management and operational issues.
Qualitative feedback from shareholders participating in the study further illustrated the depth of concern. Shareholders described Lamb Weston as “among the worst managed companies” and expressed the need for a “whole new board” to drive value creation. The prevailing sentiment was that a “wholesale change at the top” is essential to reverse the company’s current trajectory, with some investors viewing the C-suite and the Board as the primary obstacles to improvement.
Given what JANA Partners estimates as over $6 billion in shareholder value destruction, they assert that shareholders are no longer willing to accept “business as usual.” JANA Partners is advocating for dramatic change and is prepared to nominate highly qualified and engaged new directors at Lamb Weston’s 2025 Annual Meeting if the Board remains unwilling to implement necessary leadership changes. These new directors would be tasked with overseeing improved operational execution, capital allocation, and ensuring accountability from the leadership team.
While JANA Partners emphasizes its history of constructive engagement with company boards, it also makes it clear that if Lamb Weston’s Board does not embrace significant changes, exploring a sale of the company should be considered. JANA Partners and its team of industry executives have offered to work collaboratively with the Board to rehabilitate the company and enhance long-term shareholder value.
About Jana Partners
Founded in 2001 by Barry Rosenstein, Jana Partners is known for its strategic investments in undervalued public companies. The firm actively engages with management teams and boards of directors to unlock shareholder value, often advocating for significant operational and strategic changes.
Disclaimer:
JANA Partners has publicly released this letter and the information contained within is for informational purposes. JANA Partners has not sought consent from third parties mentioned in the letter and does not necessarily endorse third-party research or estimates cited, which are used for illustrative purposes only.
