LOS ANGELES - Legion Partners Asset Management, LLC, a significant shareholder of The Chefs' Warehouse, Inc. (NASDAQ:CHEF), has announced the nomination of four new candidates to the company's Board of Directors. This move is aimed at addressing what Legion Partners views as chronic operational and share price underperformance at the specialty food distributor.
The activist shareholder, which holds approximately 3.3% of the company's outstanding stock, has expressed dissatisfaction with the current board's track record. According to Legion Partners, the existing board's tenure, averaging over nine years, has been marked by a lack of progress in improving profitability and strategic decision-making, particularly in relation to acquisitions.
Legion Partners' nominees are touted as bringing a wealth of experience in operations, finance, information systems, capital allocation, and strategic planning, which the investment manager believes are necessary to steer Chefs' Warehouse toward its full potential. The nominees include Richard N. Peretz, a former CFO at UPS; Keith D. Rohland, a former Chief Information Officer at US Foods; Wendy M. Weinstein, a restaurant group board director and consultant; and Christopher S. Kiper, a capital markets expert and co-founder of Legion Partners.
The Chefs' Warehouse has struggled to meet its own adjusted EBITDA margin targets over the years, with Legion Partners highlighting repeated failures to reach the promised 7% margin. In contrast, the company's guidance midpoint for 2023 suggests a margin of 5.7%. Legion Partners criticizes the board for not holding management accountable for these shortfalls and for overseeing what it describes as an undisciplined acquisition strategy.
Legion Partners believes that with the election of its nominees and a refocused board, Chefs' Warehouse could potentially see its share price rise to more than $85 and produce adjusted EBITDA of over $320 million by fiscal 2028. This would require achieving a 7% adjusted EBITDA margin, limiting acquisitions, and implementing a prudent capital spending program.
The shareholder's analysis of Chefs' Warehouse's performance relative to peers and indexes reveals a stark underperformance over one, three, and five-year periods. The company's stock has lagged behind not only its core and other distribution peers but also the Russell 2000 Index and the S&P Composite 1500 Food Distributors.
Legion Partners has expressed its intention to file a preliminary proxy statement and accompanying materials with the SEC to solicit votes for its slate of director nominees at the upcoming 2024 annual meeting of stockholders.
The information in this article is based on a press release statement from Legion Partners Asset Management, LLC.
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