Former Burger King CEO Bernardo Hees has become a key figure in the efforts of a disgruntled US Foods shareholder to force what it terms a “significant change” in the restaurant distribution giant’s strategy and operation.
The stakeholder, Sachem Head Capital Management, has called on fellow shareholders to support its recommendation that Hees be given a hybrid executive position where he can advise US Foods’ board and top management. The investor, which holds 8.7% of US Foods’ stock, recommended that the Brazilian business veteran be given a role comparable to the one he holds at the Avis car rental company, the post of executive chairman.
“Bernardo’s career experience reflects a unique parallel to the Company’s operations – he has been the CEO of a foodservice customer (Burger King), a foodservice supplier (Kraft Heinz) and a route-based network,” the Brazilian railroad América Latina Logística (ALL), Sachem Managing Partner Scott Ferguson said in a letter to fellow shareholders. “We believe his experience can provide the Company’s boardroom with operational expertise and discipline that would be difficult to replicate in any other single director.”
Hees is one of six directors that Sachem has called on shareholders to vote onto US Foods’ 10-person board. The change is needed, Sachem asserts, because US Foods has been too slow in closing the gap between its market share and the penetration enjoyed by the restaurant industry’s largest distributor, Sysco.
In addition to Hees and Ferguson, Sachem’s nominees are Jeri Finard, a former CEO of Godiva’s North American operations; John Harris, a one-time CEO of Nestle Waters; and David Toy, CEO of the cheese company Heartisan Foods.
US Foods responded by assuring shareholders that it met with Sachem representatives “with seriousness and urgency” after the investor raised concerns late last year. Hees and two of Sachem’s other board picks were interviewed in December, and US Foods said it agreed to give board seats to Ferguson and “a mutually agreed-upon second director with relevant supply chain leadership experience.”
But, the distributor continued, it drew the line at giving Hees a board seat or advisory role because of “significant concerns regarding his leadership roles at previous companies.” The communication says that Hees paid a fine equal to $54 million after Brazilian regulators investigated ALL’s finances.
The communication also asserts that Kraft Heinz’ valuation dropped $50 billion during Hees’ tenure as CEO, pulling down its stock price by 50%, and that the company paid $65 million in civil penalties after he left because of questions about contracts being changed.
UF Foods said it raised the issues during Hees’ interview and that he was unable to dispel the allegations.
“As a result, the Board was not willing to appoint him to the Board, let alone name him Executive Chairman as originally proposed by Sachem Head,” the distributor told its shareholders.
Restaurant Business could neither verify nor disprove US Foods’ assertions, and was unable to reach Hees for comment.
The back-and-forth unfolded on the cusp of US Foods’ release of its financial results for the fourth quarter ended Jan. 1. The industry’s second largest distributor posted a net income of $69 million, compared with a year-ago loss of $10 million, on sales of $7.64 billion, up 24.5%.
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