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Exclusive: Hedge fund Sachem Head targets International Flavors - sources

(Reuters) - Sachem Head Capital Management LP has amassed a roughly $1 billion stake in International Flavors & Fragrances Inc and nominated four directors to the chemical company’s board, people familiar with the matter said on Wednesday.

FILE PHOTO: Scott Ferguson, Managing Partner and Portfolio Manager for Sachem Head Capital Management LP, presents during the 2018 Sohn Investment Conference in New York City, U.S., April 23, 2018. REUTERS/Brendan McDermid

The activist hedge fund’s board challenge comes as IFF earlier this month completed a $26.2 billion merger with DuPont’s nutrition unit, creating a food ingredients and consumer goods materials giant.

IFF’s stock price rose as much as 9% in early trading on Wednesday and changed hands at $135.16, up 5.6%, as the broader market fell slightly.

Sachem Head, headed by hedge fund veteran Scott Ferguson, wants IFF to take action to improve its financial performance and integrate the new unit smoothly, the sources said, requesting anonymity because the matter is confidential.

IFF did not comment.

Shares of IFF, which has a market capitalization of $33 billion, have lagged its competitors. In the last 52 weeks, the New York-based company’s share price has dropped 8.61%, while rival Givaudan has gained 10.31%.

The DuPont deal comes after the company agreed to acquire Frutarom in 2018 for $7.1 billion. In 2019, as IFF integrated the company, it alerted the U.S. government to potential bribes Frutarom made in Russia and Ukraine.

IFF is run by Andreas Fibig, who has been chief executive and chairman since September 2014. Its board currently has 13 members, seven stemming from the IFF board and six newcomers from DuPont’s unit, including Ed Breen, DuPont’s executive chairman and chief executive, who will become the lead independent director at the 2021 annual meeting.

Research group Gordon Haskett has periodically mentioned IFF as a potential target for activists and wrote in its morning note that a large share block traded after market close on Tuesday “got us wondering whether this is our unnamed activist topping off a position before he or she goes public.”

IFF is scheduled to report earnings later on Wednesday.

Sachem Head owned shares in less than 20 U.S. companies at the end of the third quarter, according to a regulatory filing that showed animal health care company Elanco Animal Health Inc and materials company Olin Corp as its biggest investments. Ferguson is a board member at each company.

Last year, Sachem Head gained 45.6%, beating the Standard & Poor’s 500 stock index, which gained 16%. In 2019, the New York-based firm returned approximately 22%.

Reporting by Svea Herbst-Bayliss in Boston; Editing by Bernadette Baum and Dan Grebler

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