By Svea Herbst-Bayliss

(Reuters) – Hedge fund Sachem Head Capital Management has been in talks with US Foods Holding Corp to end its board challenge. In exchange, three directors from the distributor of food are being replaced by Pietro Satriano.

This settlement would end one of the most high-profile corporate disputes this year. US Foods is struggling to increase profit margins comparable with its competitors like Sysco Corp (NYSE:) because inflation spiked, and supply chain disruptions occurred during the pandemic.

According to sources who requested anonymity because of the confidential nature of the matter, a deal cannot be guaranteed. Talks could still fail before Rosemont’s Annual Meeting of Shareholders on May 18 in Illinois.

Sachem Head’s representative declined to comment. US Foods representatives did not respond.

US Foods is the largest shareholder of Sachem Head with 8.7%. He has also been an investor in US Foods since 2018.

Scott Ferguson is the founder of Sachem Head and portfolio manager. He began publicly pushing for improvements at US Foods in late 2013.

Satriano, who has been leading US Foods since 2015, responded to the announcement of reforms that included two new members for this year’s board. Sachem Head took these steps into consideration and decreased the number of seats on its board to five, from seven.

On Monday, Institutional Shareholder Services, a proxy advisory firm, recommended investors back Ferguson and three other Sachem Head candidates.

ISS suggested that US Foods might have proposed two additional board seats in settlements, but this may not be sufficient to force for effective change.