Jana Partners has nearly 10% stake in Freshpet, sources say

Activist plans to push pet-food company to make changes to boost stock price, explore sale

An activist investor has a nearly 10% stake in Freshpet Inc. and plans to push the pet-food company to make changes to boost its stock price and explore a sale, according to people familiar with the matter.

Jana Partners LLC believes Freshpet could be an attractive target for larger competitors in the sector that have shown an appetite for deals in recent years, the people said. It also wants the company to consider other changes such as operational and capital-allocation improvements. 

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The activist hedge fund has recruited former Kraft Foods Chief Financial Officer Timothy McLevish, as well as Diane Dietz, who was chief executive of skincare-product maker Rodan & Fields, and ex-Jarden Corp. Chief Executive James Lillie for help with the campaign, the people said. 

Two former professional athletes—basketball star Dwyane Wade and baseball star CC Sabathia—are serving as special advisers, they said.

Ticker Security Last Change Change %
KHC THE KRAFT HEINZ CO. 33.52 -0.10 -0.30%
JAH n.a. n.a. n.a. n.a.

Freshpet specializes in refrigerated high-end pet food made with blends of meat, vegetables and fruits. Secaucus, N.J.-based Freshpet has struggled lately; when announcing its second-quarter earnings in August, the company revised its guidance as a result of inflation pressure and quality-control issues. Its shares were down roughly 80% from their high in April 2021 and about 60% so far this year through Wednesday. 

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Labrador dog playing outdoors

Jana Partners believes that if it pulls the right strings (or leashes in this case), it can help Fresh Pet find a knew forever home. (iStock)

At its peak, Freshpet had a market value of around $8 billion; it is now just under $2 billion. Freshpet shares closed up 16% after The Wall Street Journal reported on Jana’s plans.

Ticker Security Last Change Change %
FRPT FRESHPET 50.10 -0.23 -0.46%

Earlier this month, the company shuffled several executive roles in a bid to improve its operations and said its CFO resigned. CEO Billy Cyr said at the time that the company’s rapid growth over the past few years had created "a unique set of opportunities and challenges." 

Nestle owns similar specialty pet food brand Purina. Kit Kat bars are also produced by Nestle. Brand Kit Kat was registered in 1911 (iStock / iStock)

In recent years, food makers including Nestlé SA and General Mills Inc. have pointed to pet-food sales as a bright spot as consumers spend more on fancier offerings. Nestlé owns the Purina brand, among others, while General Mills’ portfolio includes Blue Buffalo, a premium brand it bought for around $8 billion in 2018.

Ticker Security Last Change Change %
NSRGY NESTLÉ SA 108.511 -0.16 -0.15%
GIS GENERAL MILLS INC. 78.64 -0.14 -0.17%

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There have been a string of investments in the sector more recently, including Mars Inc.’s acquisition of a small fresh-pet-food maker earlier this year. In August, Colgate-Palmolive Co. said it was buying three dry-pet-food manufacturing plants for $700 million to support the growth of its Hill’s Pet Nutrition business.

Ticker Security Last Change Change %
AMZN AMAZON.COM INC. 114.01 -4.00 -3.39%
CAG CONAGRA BRANDS INC. 33.52 +0.07 +0.19%

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New York-based Jana was founded in 2001 by Barry Rosenstein. It has agitated at other consumer companies including Whole Foods Market Inc., sold to Amazon.com Inc. in 2017, and Pinnacle Foods, sold to Conagra Brands Inc. in 2018. In 2014, it pushed for PetSmart to be sold. The pet-supply retailer was sold the following year to a consortium of private-equity firms.