Investing.com -- Activist investor Jana Partners has acquired a stake of roughly 5% in Lamb Weston and plans to pressure the frozen potato product maker to explore a potential sale, according to a report from The Wall Street Journal on Friday.
Lamb Weston shares are up more than 7% premarket following the news.
The activist firm, working alongside Continental Grain, is also expected to push for operational improvements and changes to Lamb Weston's capital-allocation strategy, said the WSJ, citing people familiar with the matter.
The publication says Jana may nominate new board members, potentially including Timothy McLevish, Lamb Weston's former executive chairman, along with other industry veterans like Joseph Scalzo, Diane Dietz, Brad Alford, and John Gainor.
However, the window for director nominations does not open until mid-2025.
Eagle, Idaho-based Lamb Weston, valued at about $10 billion, is North America's largest producer of french fries and the second-largest globally, serving customers such as McDonald's (NYSE:MCD) and Yum Brands, which owns KFC.
Despite its market size, Lamb Weston's share price has declined by more than 34% this year, with the WSJ stating it is due to reduced restaurant demand amid rising menu prices.
In contrast, the S&P 500 index has risen more than 22% during the same period.
Lamb Weston faced a sharp sell-off in July after reporting quarterly sales and profits below analysts' expectations, with JPMorgan analysts calling it "one of the worst days for a larger-cap food producer in modern history."
The company has since announced cost-cutting measures, including shutting down a processing facility, temporarily reducing production, and laying off workers, notes the WSJ.
Jana's investment in Lamb Weston follows a pattern of the activist pushing food companies toward deals, including Freshpet (NASDAQ:FRPT) and Whole Foods, which was acquired by Amazon (NASDAQ:AMZN) in 2017.
The firm previously pushed Conagra to spin off Lamb Weston in 2016. The WSJ said Jana believes Lamb Weston could attract suitors from larger food companies.