Activist investor Jana Partners is also set for a proxy fight with Freshpet (NASDAQ:FRPT) and has nominated four directors to the pet food company’s board for election at the 2023 annual meeting. According to a letter addressed to other shareholders disclosed on Wednesday, Jana has a 9.3% stake in Freshpet.
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Jana alleged that Freshpet’s missteps have resulted from the Board’s disregard of its most basic duties to shareholders. The activist investor acknowledged that recent changes by the management are “step in the right direction.” Nonetheless, Jana noted that the board has failed to supervise management over multiple years as the company’s performance worsened, liquidity deteriorated, and shareholder value declined.
In its letter, Jana pointed out that over half of Freshpet’s independent directors “pursued outside interests with corporate resources and key members of management.” Jana specifically named two Freshpet directors, Olu Beck and David Basto, in this matter.
Currently, Freshpet has an 11-member board. Its annual shareholder meeting is scheduled to be held on July 25. In response to Jana’s letter, Freshpet said that it has engaged extensively with the activist investor over the past nine months, with Jana rejecting the board’s attempts to reach a constructive resolution.
“We remain hopeful to avoid a distracting proxy fight as the management team continues to focus on driving growth and margin expansion as demonstrated in recent quarterly performance,” said the company.
In its response, Freshpet mentioned initiatives being taken by the company to create value for shareholders, including the opening of the first phase of the state-of-the-art Freshpet Kitchen in Ennis, Texas, in October 2022. This facility is expected to boost the company’s net sales to $1.8 billion by 2027 and drive margin expansion. Freshpet believes that Jana’s sole intention is to force the sale of the company without considering all potential ways to create value.
Is FRPT a Good Stock to Buy?
Wall Street is cautiously optimistic on Freshpet stock based on seven Buys and four Holds. The average price target of $75.45 implies 14% upside. Shares have surged over 25% year-to-date.
