Greencore may face a preferred playbook from Activist Oasis to increase value.

Company: Greencore Group (GNC-GB)

Greencore is an Ireland-based manufacturer of convenience foods with segments in Convenience Foods UK and Ireland. The company supplies a range of chilled, frozen, and ambient foods to retail and food service customers in the United Kingdom, including all supermarkets. Additionally, Greencore supplies convenience and travel retail outlets, discounters, coffee shops, foodservice, and other retailers. The company has over 16 manufacturing and 18 distribution centers in the United Kingdom.

Stock Market Value: 531.2 million pounds (about 1.14 pounds per share)

Activist: Oasis Management

Percentage Ownership:  n/a

Average Cost: n/a

Oasis Management is a global hedge fund management firm with offices in Hong Kong, Tokyo, Austin, and the Cayman Islands. Founded in 2002 by Seth Fischer, who serves as the firm's chief investment officer, Oasis is an authentic international activist investor that primarily focuses on activism in Asia (with occasional forays into Europe). The firm boasts an impressive track record of successful international activism, having achieved numerous victories through its prolific and strategic efforts. Oasis has a diverse range of tools at its disposal, including getting seats on boards, opposing strategic transactions, advocating for strategic actions, improving corporate governance, and holding management accountable.

What's happening

Greencore's managing director, Daniel Wosner, has met with the board and management several times as Oasis Management builds a stake in the company, nearing the UK's 5% threshold on March 15, according to a report by the Financial Times.

Behind the scenes

Greencore Group is a major supplier of prepacked and convenience foods in the UK and Ireland, serving customers such as supermarkets, convenience stores, retail outlets, coffee shops, and other retailers. The company divides its operations into two categories: "food to go" and "other convenience." In 2023, "food to go" accounted for 65% of the group's revenue, while "other convenience" generated the remaining 35%. The Covid-19 pandemic has had a significant impact on Greencore's recent history, causing the company to struggle to regain its footing and recover its stock price and operating performance. Since the pandemic, the stock has fallen sharply from its pre-pandemic peak. Additionally, Greencore's adjusted operating profit of 76.3 million pounds and adjusted earnings before interest, taxes, depreciation, and amortization of 132.8 million pounds have not fully recovered to their pre-pandemic levels of 105 million pounds and 142 million pounds, respectively. Operating margins fell to 2% in 2020 and 2021, down from

Despite facing similar challenges such as the pandemic, inflation, and a recessionary macro environment in the UK and Ireland, Greencore has struggled more than its peers to recover. Specifically, Greencore has not reinstated its dividend since suspending it in 2020, while its peers offer dividend yields ranging from 1% to 7%, with an average of 3.5%. Additionally, Greencore's operating and EBITDA margins are lower than those of its peers Premier Foods and Bakkavor, although Greencore had better margins in both categories in 2019.

Oasis is an Asian activist, but it has also pursued activism in Europe twice before this. Both times, its returns were exceptional, averaging 108.75% versus 5.29% for the MSCI EAFE Index. The investments were in similar businesses to Greencore, one being a direct peer, Premier Foods, and the other being The Restaurant Group. At The Restaurant Group, Oasis successfully agitated for the removal of the company's chairman and asset sales to accelerate medium-term strategic plans to increase adjusted EBITDA. The Premier Foods campaign was a three-act play, with Oasis accumulating an 8.3% stake in 2017, urging shareholders to vote against the re-election of then-CEO Gavin Darby in 2018, and inviting Wosner back to join the board in February 2019, resulting in a strategic review.

Premier Foods and Greencore have experienced contrasting fortunes since Wosner's reappointment. Premier has experienced a nearly 300% return, while Greencore has seen a 41.5% decline. Premier has resumed its dividend, while Greencore has suspended it. Premier's EBITDA margins are approximately 20%, compared to mid- to high-single digits for Greencore.

Oasis is a qualified investor who could create shareholder value at Greencore. The company's situation is amicable, and it would be beneficial to offer Wosner a board seat. Oasis has a history of pushing for the sale of non-core assets, which aligns with streamlining operations and creating shareholder value. While Oasis may not necessarily plan to push for executive ousters, changes need to be made, and this should serve as a warning to management. One Greencore director that Oasis knows well is Alastair Murray, who was once the CFO and interim CEO of Premier Foods. Oasis played a role in elevating Murray to replace former Premier CEO Gavin Darby in 2019.

Ken Squire is both the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments.