Company: Performance Food Group (PFGC)
Business: Performance Food Group is a food and foodservice distribution company that operates through three segments: foodservice, specialty (formerly “Vistar”), and convenience. Its foodservice segment distributes a line of national brands, customer brands, and its proprietary-branded food and food-related products to independent and multi-unit chain restaurants and other institutions. Its specialty segment specializes in distributing candy, snacks, beverages, and other items nationally to vending, office coffee service, theater, retail, hospitality, and other channels. Its convenience segment distributes candy, snacks, beverages, cigarettes, other tobacco products, food and foodservice related products and other items to convenience stores across North America. It markets and distributes over 250,000 food and food-related products to customers across the United States from about 144 distribution facilities to over 300,000 customer locations in the food-away-from-home industry.
Stock Market Value: $16.34 billion ($104.40 per share)
Activist: Sachem Head Capital Management
Percentage ownership: ~2 – 4%
Average Cost: n/a
Activist Commentary: Sachem Head was founded in 2013 by Scott Ferguson, the first investment professional hired at Pershing Square, where he worked for nine years. Sachem Head has a history of solid value investing, but we believe that they really found their activist stride in 2020 with their investment in Olin. Scott Ferguson took a board seat at Olin – the first public company board seat he took in an investment that was not part of a group – and created tremendous value there. More recently, after nominating a majority director slate, Sachem Head settled for three board seats at US Foods, and most recently settled for a board seat at Twilio in April 2024. Taking board seats signifies both commitment and contribution and this philosophy and style is really paying off for Sachem Head.
What’s happening
On Aug. 21, Sachem Head delivered a nomination notice for the following four candidates to stand for election to Performance Food Group’s Board at the 2025 Annual Meeting: Scott D. Ferguson, David A. Toy, R. Chris Kreidler and Karen M. King. Additionally, Sachem Head has urged the company to explore a potential business combination with US Foods and, absent a transaction, further improve margins.
Behind the scenes
Performance Food Group is the third largest foodservice distribution company in North America, behind Sysco and US Foods, which all together command approximately 38% market share. The company operates through three segments. The core foodservice segment (61.8% of EBITDA) distributes national, customer, and proprietary-branded food and food-related products. Convenience (20.6%) distributes candy, snacks, beverages, cigarettes, and other tobacco products to convenience stores. Specialty (17.61%) distributes candy, snacks, beverages and other items to specialty vendors.
On Aug. 21, Sachem Head delivered a nomination notice for the following four candidates to stand for election to PFG’s board at the 2025 Annual Meeting: Scott D. Ferguson (founder and managing partner of Sachem Head), David A. Toy, R. Chris Kreidler and Karen M. King.
Additionally, Sachem Head has urged PFG to explore a potential business combination with US Foods and, absent a transaction, further improve margins.
Ferguson and Toy previously served together on the US Foods board as part of a Sachem Head Cooperation Agreement. At US Foods, Sachem Head helped install a new CEO and management team, which catalyzed a successful turnaround for the company. Since Sachem Head filed its 13D at US Foods, the company’s stock has more than doubled.
The other two candidates have just as much experience: Kreidler was the CFO for Sysco for six years and King is an executive vice president at McDonald’s and serves on the Aramark board. This is an all-star team of nominees that are well positioned to navigate PFG through operational improvements and a strategic evaluation.
While there is an opportunity to improve operating margins at the company, the main catalyst here is the merger with US Foods. The potential synergies that could be attained in such a combination make it very hard to ignore. These synergies are evident from another proposed industry consolidation, Sysco’s 2013 attempt to merge with US Foods. Publicly, this deal was projected to deliver annual synergies of at least $600 million within three to four years relative to US Foods’ $826 million of EBITDA at the time. In other words, the projected synergies represented more than 70% of US Foods’ EBITDA, and the numbers that were thrown around privately were even larger. This is an extraordinary figure, and largely unique to the food distribution landscape and the amount of purchasing, logistics and warehouse rationalization synergies that these companies have. Extrapolating these numbers to a US Foods/PFG merger and applying similar levels of synergies using the EBITDA of PFG’s foodservice segment ($1.2 billion), which holds most of the synergistic potential, a merger could be expected to yield $800 million to upwards of $1 billion in synergies. Moreover, if there is anyone who could validate this analysis, it would be Sachem director nominee Chris Kreidler, who was the CFO of Sysco at the time.
However, the Sysco/US Foods deal was ultimately blocked by the Federal Trade Commission due to antitrust concerns centered around a merger of #1 and #2 that would eliminate Sysco’s only national competitor. There are a few reasons why a merger between US Food and Performance Food Group may have a different outcome. First, this would be a merger of the second and third largest players, rather than first and second; and unlike Sysco, PFG is not a national competitor, with little to no footprint on the West Coast. Additionally, today’s regulatory environment under the Trump administration is significantly more favorable than it was when the Sysco deal was reviewed under the Obama administration. While any approved deal would likely require divestitures in certain markets and there is no guarantee of an approval, with potential synergies like this, the Board owes it to its shareholders to at least explore the possibility of a US Food merger. And that is all Sachem Head is asking. They are not forcing the company to sell but rather pleading with them to evaluate this potentially lucrative opportunity that has been brought to them.
In July 2025, US Foods confirmed in an 8-K filing that they had approached PFG about a potential combination. But it takes two to tango and, so far, PFG has not meaningfully engaged with them. Given this current sentiment, sincere consideration of this transaction appears unlikely to occur without asserting a little pressure on the board, and Sachem Head is doing that in the form of a threatened proxy fight that they would have an excellent chance of winning. Not only are proxy fights about the power of the argument, and Sachem Head has a great one here, but the company’s shareholder base contains many alternative asset managers that are more likely to support an activist agenda like this than the traditional index funds. These shareholders have a history of being receptive to good activist campaigns and the potential upside this plan could deliver and would also be impressed by the strong slate Sachem Head is nominating should be enough for them to hear the fund out.
Moreover, there is speculation that even prior to Sachem Head’s engagement, changes in the C-Suite were imminent. For more than 17 years, the company has been run by CEO George Holm, a widely respected industry leader. Now, it has been rumored that Holm will soon step down, likely to be replaced by the company’s President Scott E. McPherson. A CEO transition like this creates the perfect time for a strategic transaction for everyone involved, except maybe McPherson. When two companies of similar size merge in a merger of equals, valuation is often the easy part. It is the social issues that are often the dealbreakers. And that dynamic could be exacerbated when the merger is proposed just as the sitting president is finally getting the call up to CEO. However, McPherson hasn’t been a PFG lifer and has only been with the company for a year and a half, so the social issues surrounding leadership of the surviving entity should be achievable.
Boards and their advisors and certain shareholders often viscerally oppose any type of “sell the company” activism, and often for good reason. Often, we are the biggest critics of that type of short-term activism that gives the future value creation to a private equity fund or a strategic acquirer instead of the shareholders. But a “merge the companies” thesis is different, especially when there are such compelling synergies that create value for all shareholders. A transaction between players of this size would have to come primarily in the form of a stock-based combination, which would allow PFG and US Foods shareholders to participate in the long-term value creation that would arise from the merger.
We expect that an experienced activist like Sachem Head will be able to convince the board of this and a great outcome for shareholders would be a settlement to add two to three directors to the board along with the establishment of a new committee focused on evaluating strategic alternatives with at least one of the new directors on that committee. That could lead to a transaction that could be a windfall for everyone involved.
But if ultimately an evaluation is done and a standalone path is determined to be the best outcome, this remains a strong company and a high return on capital business with room to improve on costs and margins around the edges – areas which Sachem Head’s directors would also be valuable.
Ken Squire is 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. Performance Food Group is owned in the fund.
