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Potential Activist Targets Among Blue Harbour’s Latest Moves?

Clifton Robbins founded Blue Harbour Group in 2004, having previously served as managing member of General Atlantic Partners, LLC, a private equity firm, and as partner at Kohlberg Kravis Roberts & Co. Blue Harbour invests mainly in activist situations and, what differentiates it from other activist funds, is that Clifton Robbins invests only in companies whose management is receptive to his ideas and proposals. According to the fund’s latest 13F filing, it’s heavily invested in Adient PLC (NYSE:ADNT), a leading supplier of automotive seating, and Investors Bancorp, Inc. (NASDAQ:ISBC). In both cases, Blue Harbour Group is working with the management to unlock shareholder value. But this is not the main subject of this article. We have looked at some of the fund’s moves that went under the radar, looking for potential activist targets.

Clifton Robbins - Blue Harbour

First up is TreeHouse Foods Inc. (NYSE:THS), a private label food and beverage manufacturer. During the 2017 fourth quarter, Blue Harbour increased its stake by 18% to a little over 1 million shares. John A. Levin, the manager of Levin Capital Strategies, has also boosted his fund’s investment in TreeHouse Foods, taking it to 3.59 million shares.

TreeHouse Foods Inc. (NYSE:THS) stock has been battered in the past 12 months, having lost 54% of its value and having significantly underperformed its competitors. By comparison, J & J Snack Foods Corp (NASDAQ:JJSF) stock is up by 5.5% trailing twelve months, while Flowers Foods, Inc. (NYSE:FLO) shares have gained approximately 8.9% in the same period of time. Throughout 2017, TreeHouse Foods Inc. (NYSE:THS) failed to live up to analysts’ expectations as it continued to reorganize portfolio of brands. In 2016 the company acquired the private brands business from ConAgra Brands and in 2017 it sold its soup and infant feeding business to Riverbend Foods LLC. So far, the results have been poor. Following the release of the 2017 second quarter earnings report, the management of TreeHouse announced a new restructuring plan, which involved closing down two facilities and laying off 375 employees in the first phase. TreeHouse Foods has recently announced that it plans to close down a third facility in Visalia, California and lay off another 294 employees.

Given the poor results posted by TreeHouse Foods in the past year and the complexity of its restructuring plan, Blue Harbour Group could get involved, especially if the management of the company fails to stick to its proposed turnaround plan. The high level of competitiveness in the industry is also a signal that cash-rich competitor could be interested in taking over TreeHouse.

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