Nelson Peltz on Tuesday stepped up the pressure on HJ Heinz, claiming the US food company could almost double in value to $28bn if it took measures including cost cuts, the sale of non-core assets, and increasing marketing spend on ketchup.
In a “white paper” released on Tuesday, Mr Peltz, who owns a 5.4 per cent stake in Heinz through Trian Partners, his investment vehicle, said the company’s shares could be worth as much as $81 each if the changes were pushed through.
On Tuesday morning, Heinz shares were up 4.9 per cent to $42.92, giving it a market capitalisation of $14.4bn.
Mr Peltz, known for turning round Snapple Beverages in the 1990s and successfully challenging fast-food chain Wendy’s International earlier this year, has been pursuing Heinz since February and is nominating five members for election to the company’s board.
But he had not made any specific recommendations until Tuesday.
Trian’s “action plan” includes a reduction of $575m in annual costs, from cutting overhead costs at the company’s Pennsylvania headquarters and improving plant efficiency.
It calls on Heinz to increase its leverage ratio through a more aggressive share repurchase scheme, and to consider selling more non-core units such as Plasmon, the Italian baby biscuit business, and ABC, the Indonesian soy sauce division.
On ketchup, Trian says Heinz should stop trying to compete on price, reducing special deals with retailers that will cost $300m over time. Instead the money should be re-invested in innovation and marketing.
“The company should make it a mission for more people to eat ketchup with their fries and burgers through creative marketing on television, the internet and other outlets,” the paper says.
The assertion is backed by statistics showing that while Heinz’s market share in ketchup is high, the size of the overall market could grow, since only 40 per cent of fries, hamburgers and hot dogs are eaten with ketchup.
Heinz, which will be hosting a meeting with shareholders next week to outline its plans to bolster performance, responded: “The facts speak for themselves. In the past four years, Heinz has transformed itself dramatically to improve earnings and enhance shareholder value.
“With a leaner, highly focused portfolio of leading brands in three core categories and more efficient businesses, Heinz is now in fighting shape to deliver superior shareholder value and growth.”
Mr Peltz’s campaign is the latest in a string of moves by “activist” hedge funds to push for change at some of the largest US companies.