It would be hard to blame shareholders of most companies if
they rooted for Jeff Ubben to join their companys board
of Directors. Afterall, since 2001, the co-founder of San
Francisco-based hedge fund ValueAct Capital has served on the
Board of 21 companies. Two years after he was named a director,
the stocks of those companies were up, on average, 9.69 percent
compared with a loss of 3.77 percent for the S&P 500, for
an outperformance of nearly 14 percentage points, according to
calculations made by FactSet SharkWatch.
Last week, Ubben, who typically owns between a dozen and 20
stocks at a time, seemed to work his magic again when Sara Lee
announced a major restructuring last week. Unlike activist
hedge fund managers such asThirdPoints Dan Loeb, who
loves to mix it up publicly with management with direct attacks
on their character, Ubben prefers to act behind the scenes and
help develop a long-term plan to enhance shareholder value.
Sara Lee, where Ubben has served on the board since August
2008, is a good example. The food company said it would split
into two separate companies.
Its North American Retail and North American Foodservice
businesses (excluding the North American beverage business)
will be spun off, tax-free, into a new public company that will
retain the Sara Lee name. Its brands include Sara
Lee, Jimmy Dean, Ball Park, and Hillshire Farm. The new company
would have reported about $4.1 billion in revenue in fiscal
The yet to be named other company will consist of Sara
Lees current International Beverage and Bakery
businesses, as well as the North American beverage business.
Its brands will include Douwe Egberts, Senseo, Pickwick, Maison
du Café, LOR, Café Pilão, Marcilla
and Bimbo. This entity would have reported about $4.6 billion
in revenue in fiscal 2010 using fiscal 2010 actual exchange
The separation is expected to be completed in early calendar
Also as part of the plan, the board of directors intends to
declare a $3 per share special dividend, the majority of which
will be funded with proceeds from the sale of the
companys North American Fresh Bakery business. The
special dividend is expected to be declared and paid in fiscal
2012 and before completion of the spin-off of the two
In February 2010, Sara Lee announced plans to repurchase
between $2.5 and $3 billion of stock. After payment of the $3
special dividend in fiscal 2012, the company will have returned
a total of $3.5 billion of capital to its shareholders since
the revised capital plan was announced.
In addition, Jan Bennink was named a director and executive
chairman, replacing Jim Crown, who has served as chairman of
the board since May 2010. Crown will continue on the board and
will serve as lead independent director.
Bennink has extensive experience in the food industry, most
recently, serving as chief executive officer of Royal Numico.
He has also held management positions with Groupe Danone,
Benckiser Gmbh and Procter & Gamble. He is currently a
director of Coca-Cola Enterprises.
Ubben would not discuss any role he may have played in the
companys restructuring. However, he does note that his
firm invested in Sara Lee in 2007 and 2008 based on the
restructuring opportunity, as the companys operating
margin was almost half of the food industry average. Today, the
operating margin is in double-digits, up from the 6-7 percent
He also asserts Bennink's "track record of creating value
makes his addition to the team an exciting development.
Although investors so far have not been rewarded from this
latest announcement, they are not complaining. Since Ubben
joined the board, Sara Lees stock is up about 13 percent
while the S&P 500 has been flat.