Activist investment firm strikes deal to install three directors, remove CEO Pietro Satriano
US Foods announced that Pietro Satriano has stepped down as CEO upon the request of the Board of Directors, as per a cooperation agreement with Sachem Head Capital Management. Satriano will not be standing for re-election to the board, either, and is leaving the company. This is the latest chapter in the months-long proxy fight between US Foods and Sachem Head, its largest investor, which took an activist position. At one time, Sachem Capital had attempted to install its own CEO.
Interim leadership, board changes
The back and forth has led to the cooperation agreement and the ouster of Satriano. Sachem Head had criticized the direction of US Foods and its total return to shareholders relative to other broadline distributors. In particular, the firm had issue with some of the recent acquisitions US Foods had engineered.
Meanwhile, US Foods named Robert M. Dutkowsky executive chair and Andrew Iacobucci interim chief executive officer. Dutkowsky currently serves as non-executive chairman of the Board and Iacobucci currently serves as chief commercial officer.
Dutkowsky said, “After careful consideration, the Board determined that it is time for a change in leadership at US Foods. On behalf of the entire Board, I want to thank Pietro for his dedication and leadership to US Foods over the last 11 years and for guiding the Company through the pandemic. As we navigate this transition, US Foods remains well positioned to capitalize on the opportunities ahead to generate significant value for our shareholders.”
Iacobucci joined US Foods in 2017. As chief commercial officer, he has led the company’s merchandising, pricing and local sales functions.
Following the cooperation agreement, the US Foods Board’s Nominating and Corporate Governance Committee appointed James J. Barber, Jr., Scott D. Ferguson and David A. Toy as new independent directors, effective May 18, 2022. Ferguson and Toy will join the CEO search committee.
Sachem Head-US Foods Cooperation Agreement
The cooperation agreement between Sachem Head and US Foods also details additional provisions for this “ceasefire,” some of which are included here. The entirety of the deal can be found in the Securities and Exchange Commission (SEC) 8-K filing dated May 10:
- Sachem Head will withdraw its proxies in the upcoming May 18 shareholder meeting and its shareholder notice for nominations, accepting standstill provisions.
- It will also withdraw its request to examine US Foods’ books (more details in the 8-K).
- US Foods would announce that the board had decided to cease the service of Pietro Satriano as CEO and his appointment to the Board.
- Following the shareholder meeting, the size of the Board would increase to 13 directors.
- Once a new US Foods chief executive is appointed, the size of the Board will increase to 14 directors and the new CEO will be appointed as a director.
- Barber, Ferguson and Toy would be appointed to the Board.
- Additional ethics and governance items, as well as trigger provisions should Sachem Head’s ownership share decrease to certain levels were also covered in the filing.
Incoming Sachem Head picks for US Foods directors
Per the above, as of May 18, the date of the 2022 annual meeting of shareholders, the US Foods Board will comprise 13 independent directors. As Barber, Ferguson and Toy join, John A. Lederer will depart, having informed US Foods that he will not stand for re-election. This was also part of the cooperation agreement.
“We are pleased to welcome Jim, Scott and David to our Board,” said Dutkowsky. “Each brings experience in key areas relevant to our business that will be valuable as we continue to implement our long-range plan, including supply chain, food industry leadership and corporate governance.”
Scott Ferguson, founder and managing partner of Sachem Head, commented, “Today’s agreement is the result of a constructive dialogue with US Foods’ Board about future opportunities for the Company to deliver on its long-range plan and generate value for all shareholders. I look forward to a collaborative relationship with Bob and the rest of the Board, and to helping US Foods identify a permanent CEO to lead its next chapter of growth.”
- Ferguson leads Sachem Head Capital Management, an investment management firm based in New York. Prior to Sachem Head, he worked for Pershing Square Capital Management, L.P.
- Toy currently serves as the Chief Executive Officer of Heartisan Foods Inc., an omni-channel market leader in smoked, flavored, and kosher all-natural cheese. Before working at Heartisan Foods, he served in several positions for Sauer Brands, Inc., a manufacturer of food products In addition, he held the role of chief financial officer for Diversey Inc., a provider of cleaning and hygiene products.
- Barber formerly served as chief operating officer of UPS, one of the largest logistics companies globally. He began his career in 1985 as a package delivery driver for UPS in Atlanta and worked his way up the ladder, working for over 30 years for UPS.
“It has been an honor to have led such a remarkable team committed to making US Foods one of America’s great food companies, and I am proud of all that we have achieved together,” said Satriano, outgoing CEO. “I wish Bob, Andrew and the entire team continued success.”
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