Percentage of Ownership  5.13 %

Average cost: $33.71

Commentary of an activist:Scott Ferguson was the original investment professional at Pershing Square, where he spent nine years. He founded Sachem Head in 2013. Sachem Head is a solid investor with a long history. However, we think they hit their stride as activists in 2020 after their Olin investment. Scott Ferguson took a board seat at Olin – the first public company board seat he has taken in an investment that was not part of a group – and created tremendous value there where he remains on the board. Elanco was his next active 13D. He again took a seat on the board and is currently creating value. Sachem head is realizing the benefits of his board seat. It shows both dedication and participation.

Sachem Head Capital held a position of 5.13% for investment purposes.

Sachem Head signals subtly in its 13D filing it is interested in an open seat on the board. The filing states that Sachem Head reached an agreement with Bernardo Hees, who will serve as Sachem Head’s advisor and possibly as a nominee for director. Given that Sachem Head’s founder Scott Ferguson has been on at least two public company boards and Hees also has significant industry and operating experience, this makes sense.

To fully understand Sachem Head’s thesis, one must go back to August 2015. This was when Trian filed the 13D against Sysco. Nelson Peltz took over a seat on the board. He created significant shareholder value by increasing operating margins while focusing on Sysco’s higher-margin businesses. In 2018, Sachem Head, a 2 percent shareholder in USFD stated in a letter addressed to investors that USFD would benefit from the same actions Sysco had taken at Trian’s request. Sachem Head added that Sysco significantly increased profitability through improved pricing discipline and a greater focus on higher-margin, private label products as well as smaller customers ….. US Foods is able to implement the same programs while also innovating in areas such as central replenishment and technology. With a stock price at $45, Sachem Head forecast that US Foods would earn $3 per share by 2020. Take 2020 and you will see that both operating and gross margins have declined to $1.66 per share and $36.08. This means that there’s still a lot to do, and more opportunities for value creation.

Scott Ferguson is an activist with extensive experience. However, he has already served on two boards of public companies and doesn’t have the operational experience as Trian’s Nelson Peltz. (Very few activists do). Hees, who is an experienced operator, was the wise choice. Hees was a partner in 3G Capital, and was the CEO of Kraft Heinz & H.J. Heinz between 2013 and 2019. Nelson Peltz, a director at H.J. Nelson Peltz was a director of H.J. Peltz began an activist campaign at Sysco in 2012, two years after Heinz left. Hees was fired from Heinz two years ago. Hees is now starting one at Sysco competitor USFD. Sachem Head has recruited all the players necessary to increase shareholder value. It remains to be seen if the company views it in that manner.

Ken Squire, the president and founder of 13D Monitor is an institution research service that focuses on shareholder activism. He also founded and managed the portfolio for the 13D Activist Fund which invests in a range of activist 13D investments. US Food Holdings owns the fund.