August 16, 2019 / 10:03 PM / 4 months ago

Mantle Ridge's Hilal buys stake in Aramark, eyes talks with management

BOSTON/NEW YORK, Aug 16 (Reuters) - Activist investor Paul Hilal’s Mantle Ridge LP bought nearly 10% of U.S. food services company Aramark’s common stock and while it plans to push for changes, the fund is stopping short of making an outright bid for the company, a regulatory filing showed.

News of the investment comes roughly three months after Hilal held talks with banks about raising financing to buy the company, which would have laid groundwork for one of the biggest leveraged buyouts since the financial crisis.

Now he has dropped such plans, a person familiar with his thinking said on Friday. The filing, which disclosed the investment, would have had to detail any planned buyout and it did not.

In addition to the common stock, Mantle Ridge owns derivatives, bringing its total economic exposure to roughly 20% of Aramark, the filing said.

The filing said that Hilal plans to speak with management, board members and stockholders, but it is unclear what kinds of changes he may push for. The filing said that Mantle Ridge could take additional steps including running a proxy contest.

Hilal did not return a call or email seeking comment and Aramark could not be reached for comment.

Aramark has already had experience with an activist investor when ValueAct’s Jeffrey Ubben bought shares at the end of 2018. ValueAct’s more recent filings for 2019 did not list Aramark.

Based in Philadelphia, Aramark is a provider of food and uniforms to education, healthcare, business, sports and leisure establishments. Its main competitors include Cintas Corp and UniFirst Corp.

Aramark has been trying to grow its business in the face of increasing competition and tight labor markets. It has had private equity ownership twice before, the last time in 2006 in an $8.3 billion buyout by then-Chairman Joseph Neubauer with the help of a consortium that included Goldman Sachs Capital Partners, CCMP, JPMorgan Partners, Thomas H. Lee Partners and Warburg Pincus.

The bet on Aramark is Hilal’s second big investment coming on the heels of his taking on railroad CSX two years ago.

Hilal, who previously worked for his college friend William Ackman as a partner at Pershing Square Capital Management, helped pave the way for CSX to install prominent railroad executive Hunter Harrison as its CEO.

Although Harrison died only a few months later, the stock price has continued to rise, gaining roughly 40% since 2017 and generating strong returns for Mantle Ridge.

Reporting by Svea Herbst-Bayliss; Editing by Cynthia Osterman

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