Sachem Head's April 2022 letter to US Foods stockholders
- Written by
- Scott Ferguson
- Organisation
- Sachem Head Capital Management
- Filed
- 26 Apr 2022
- Sector
- Foodservice distribution
Read the original at sec.gov (opens in a new tab)
This is the view as filed on 26 Apr 2022, not a statement of what the author thinks today.
About this letter
Scott Ferguson signed this letter for Sachem Head Capital Management to his fellow US Foods stockholders on 26 April 2022, during a proxy contest for the foodservice distributor's board. Sachem Head beneficially owned approximately 8.7% of the company, a roughly $750 million investment, and had been invested since 2018, mostly as a passive stockholder, before nominating five candidates for election.
The letter compares US Foods throughout with its closest peer, Sysco Corporation, and argues that the company's shortfalls trace back to a board that has not held management accountable. It covers shareholder returns since the 2016 IPO, valuation, margins, operating and capital allocation decisions, the history of guidance and the failed settlement talks, then sets out the nominees' priorities and the upside Sachem Head sees, ending with biographies of each nominee.
Why read it
It shows how an activist turns a peer comparison into a valuation argument, linking a margin gap and a multiple discount to specific operating and governance failures.
What to notice
- 1
The valuation gap frames everything: on consensus 2024 estimates US Foods traded at about 11 times earnings and Sysco at about 17 times, a premium of roughly 50% for a peer with highly similar business models and leverage.
Continue the investment thesis
See the 3 remaining takeaways on what this investor is arguing and why, and every analysis across the Letters & Theses library.
Checking what you can open…
“Who do you believe will make US Foods deliver?”
Companies discussed
- US Foods Holding Corp. (USFD)
- Sysco Corporation (SYY)
Topics
- board change
- governance
- margin expansion
- capital allocation
- culture
- valuation discount
L3VLUP does not host this document. It belongs to Sachem Head Capital Management and is a public SEC filing; the notes above are L3VLUP’s reading of it.
The same argument, elsewhere
- Gregory Goff's letter to Phillips 66 shareholders, filed by Elliott · Elliott Investment Management
- Starboard Value's letter to Autodesk shareholders on margins and board change · Starboard Value
- JANA Partners' 2017 letter to EQT stockholders opposing the Rice acquisition · JANA Partners
- Trian's July 2017 letter to Procter & Gamble shareholders · Trian Fund Management