Sysco shares leap as Nelson Peltz takes 7 percent stake

Now, shares for Sysco over the past five years have only been up 8 percent every year compared with 12 percent for all food distribution companies as well as 16.5 percent in the S & P 500 index, as described by Morningstar analysts.

Sources revealed that Trian will likely try to seek board representation, but it is not clear if Nelson Peltz himself would have a seat on the company’s board. In a CNBC report, a Sysco representative said, “

Sysco welcomes collaborative discussions with investors who share our interest in creating value by marketing and delivering great products to our customers with exceptional service.”

According to the Wall Street Journal, the rise of smaller specialty distributors and wholesalers to restaurants has been responsible for a significant portion of Sysco’s declining profits.

Trian also calls for Sysco to better align the compensation of its management team to the company’s, Reuters reported.

Trian, co-founded by Nelson Peltz, said in a regulatory filing that it has met with Sysco Chief Executive Bill Delaney and Chairman Jackie Ward to discuss ways to improve Sysco’s profitability and increase value for shareholders. Sysco won’t speculate on Trian’s intentions or future actions, he said.

The news pushed the Houston, Tex., firm’s stock up 6.88% to $41.17 a share.

Peltz has held positions in various food companies, including Kraft Foods, Mondelez (MDLZ), Wendy’s (WEN) and Pepsi (PEP), CNBC.com adds. After the stake acquisition, Train Partners has become the largest individual shareholder in Sysco Corporation.

Trian Fund expressed its perception that Sysco’s operating and financial performances underperformed relative to its potential despite its competitive advantage.

Sysco recently disclosed that the merger and termination costs would total $693 million, including a $300 million termination fee to US Foods.

It also expanded a stock repurchase program, agreeing to buy $3 billion in shares over the next two years.

Trian will use the opportunity to take a larger stake in the food service company to improve margins and return more capital to shareholders. However, the investment firm hasn’t mentioned if Peltz will be looking for position on the board.