Boston, June 18 - Barington Capital Group raised its stake in Lancaster Colony Corp. and asked the company to improve its profitability in a hurry, suggesting the activist hedge fund may be readying for a more public fight.
Barington, already the biggest Lancaster stakeholder, told U.S. regulators on Monday that it recently raised its stake to 5.29 percent.
The fund, which has successfully prodded plastics company A. Schulman Inc. and others to change course, also made public its 14-month-long campaign to press Lancaster's management into boosting the company's share price.
In a politely but firmly worded letter, Barington CEO James Mitarotonda said the fund believes Lancaster, which makes food products, glassware and candles and automotive products, should sell its non-core businesses, cut costs and improve its capital structure. The letter was filed to regulators.
The Columbus, Ohio-based company's share price has climbed 9.25 percent in the last 52 weeks but lags the NASDAQ Composite Index by 10.82 percent, and Mitarotonda called the stock "significantly undervalued." Lancaster's share price traded at $42.29 on Monday, up 24 cents, or 0.57 percent.
"We find the Company's plummeting profitability ratios and disappointing share price performance under your leadership over the past ten years to be entirely unacceptable and eroding value for the public shareholders of the Company," Mitarotonda wrote to Lancaster Chief Executive John Gerlach.
Mitarotonda said Barington has been a "patient investor" and given Gerlach plenty of time to improve matters since first meeting with him and his management team over a year ago. Now the New York hedge fund may be running short on patience. Mitarotonda said it was "extremely disappointed" that Lancaster has only closed one industrial glass manufacturing operation and sold off an automotive accessory business.
Barington did not immediately respond to questions about what it plans to do next.
Lancaster, which pledged to review its nonfood operations 14 months ago and hired Goldman Sachs to do so, said it is making progress. "The review continues and we have taken steps in this effort," company spokesman Earle Brown said, adding that he did not know why Barington made its letter public now.
Barington, which also owns shares of Ceridian Corp. and The Pep Boys - Manny, Moe & Jack, is among a handful of activist investors pushing for corporate change and also willing to put in time to make it happen by running for board seats.