Company: Performance Food Group (PFGC)
Business: Performance Food Group is a food and foodservice distribution company that operates through three segments: foodservice, specialty (formerly “Vistar”), and convenience. Its foodservice segment distributes a line of national brands, customer brands, and its proprietary-branded food and food-related products to independent and multi-unit chain restaurants and other institutions. Its specialty segment specializes in distributing candy, snacks, beverages, and other items nationally to vending, office coffee service, theater, retail, hospitality, and other channels. Its convenience segment distributes candy, snacks, beverages, cigarettes, other tobacco products, food and foodservice related products and other items to convenience stores across North America. It markets and distributes over 250,000 food and food-related products to customers across the United States from about 144 distribution facilities to over 300,000 customer locations in the food-away-from-home industry.
Stock Market Value: $16.34 billion ($104.40 per share)
Activist: Sachem Head Capital Management
Percentage ownership: ~2 – 4%
Average Cost: n/a
Activist Commentary: Sachem Head was founded in 2013 by Scott Ferguson, the first investment professional hired at Pershing Square, where he worked for nine years. Sachem Head has a history of solid value investing, but we believe that they really found their activist stride in 2020 with their investment in Olin. Scott Ferguson took a board seat at Olin – the first public company board seat he took in an investment that was not part of a group – and created tremendous value there. More recently, after nominating a majority director slate, Sachem Head settled for three board seats at US Foods, and most recently settled for a board seat at Twilio in April 2024. Taking board seats signifies both commitment and contribution and this philosophy and style is really paying off for Sachem Head.
What’s happening
On Aug. 21, Sachem Head delivered a nomination notice for the following four candidates to stand for election to Performance Food Group’s Board at the 2025 Annual Meeting: Scott D. Ferguson, David A. Toy, R. Chris Kreidler and Karen M. King. Additionally, Sachem Head has urged the company to explore a potential business combination with US Foods and, absent a transaction, further improve margins.
Behind the scenes
Performance Food Group is the third largest foodservice distribution company in North America, behind Sysco and US Foods, which all together command approximately 38% market share. The company operates through three segments. The core foodservice segment (61.8% of EBITDA) distributes national, customer, and proprietary-branded food and food-related products. Convenience (20.6%) distributes candy, snacks, beverages, cigarettes, and other tobacco products to convenience stores. Specialty (17.61%) distributes candy, snacks, beverages and other items to specialty vendors.
On Aug. 21, Sachem Head delivered a nomination notice for the following four candidates to stand for election to PFG’s board at the 2025 Annual Meeting: Scott D. Ferguson (founder and managing partner of Sachem Head), David A. Toy, R. Chris Kreidler and Karen M. King.
Additionally, Sachem Head has urged PFG to explore a potential business combination with US Foods and, absent a transaction, further improve margins.
Ferguson and Toy previously served together on the US Foods board as part of a Sachem Head Cooperation Agreement. At US Foods, Sachem Head helped install a new CEO and management team, which catalyzed a successful turnaround for the company. Since Sachem Head filed its 13D at US Foods, the company’s stock has more than doubled.
The other two candidates have just as much experience: Kreidler was the CFO for Sysco for six years and King is an executive vice president at McDonald’s and serves on the Aramark board. This is an all-star team of nominees that are well positioned to navigate PFG through operational improvements and a strategic evaluation.
While there is an opportunity to improve operating margins at the company, the main catalyst here is the merger with US Foods. The potential synergies that could be attained in such a combination make it very hard to ignore. These synergies are evident from another proposed industry consolidation, Sysco’s 2013 attempt to merge with US Foods. Publicly, this deal was projected to deliver annual synergies of at least $600 million within three to four years relative to US Foods’ $826 million of EBITDA at the time. In other words, the projected synergies represented more than 70% of US Foods’ EBITDA, and the numbers that were thrown around privately were even larger. This is an extraordinary figure, and largely unique to the food distribution…
Read More: Sachem Head is pushing for a Performance Food merger. Here’s why a deal makes