(Bloomberg) -- Jana Partners, the activist fund run by Barry Rosenstein, disclosed a stake in Pinnacle Foods Inc. and is urging the packaged food manufacturer to explore a sale or another transactions in the frozen food space.
The New York-based hedge fund and its partners own 9.5 percent of the food manufacturing company, according to a regulatory filing Thursday. Jana said in the filing that it believes Pinnacle is in a good position to consider consolidation given its strong position in the frozen foods industry.
Jana said it may also discuss other issues with the company, including its cost structure, operations and board composition.
Jana has partnered on the investment with former Unilever NV executive James Lawrence, Lululemon Athletica Inc. Chairman Glenn Murphy, and Rodan & Fields LLC Chief Executive Officer Diane Dietz.
A spokesman for Pinnacle said in an emailed statement Friday the company was aware of Jana’s investment, adding that Pinnacle’s board of directors and management welcome stockholder input and are committed to continuing to create value for all stockholders.
Pinnacle shares rose as much as 8.9 percent in early trading in New York Friday. The company had a market value of about $6.6 billion before Jana’s disclosure.
Jana has a history of agitating in the food sector, having taken a stake in Whole Foods Market Inc. last year before it was bought by Amazon.com Inc. It has also pushed for changes at Conagra Brands Inc. and Safeway Inc. and more recently at Outback Steakhouse owner Bloomin’ Brands Inc., where it was awarded a board seat this year.
The possibility that Conagra, where Jana is still invested, could buy Pinnacle remains one of the most likely transactions in the sector, according to David Palmer, a New York based analyst with RBC Capital Markets.
“We continue to believe that a Conagra Brands acquisition of Pinnacle Foods remains -- along with Kraft Heinz buying Mondelez –- among the most likely potential large-scale M&A events in U.S. food,” he said in a note to clients on April 3. “We believe U.S. frozen is ripe for consolidation.”
After three years of restructuring, Conagra is now fully focused on packaged food, and combining the companies would create the highest gross margin and profit upside of any transaction in his coverage space, Palmer said.
Pinnacle previously agreed to a deal with a company run by Conagra Chief Executive Officer Sean Connolly, Palmer added. Pinnacle agreed in 2014 to sell itself to Hillshire Brands Inc. in a deal that later fell apart.
“Conagra’s management team therefore has an intimate knowledge of Pinnacle’s business given prior due diligence and planning,” Palmer said.
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