The billionaire investor, who owns roughly US$50,000 worth of McDonald’s stock, is pushing the company to change how it sources its pork and has nominated two directors to the company’s board to help monitor progress on the issue.

He has said confining pigs in crates during their pregnancy is inhumane and McDonald’s pledged a decade ago to stop buying pork from suppliers that use the crates by the end of this year.

McDonald’s said in a statement that it cares about the health and welfare of the animals in its supply chain but objected to Icahn’s calls for new commitments.

“What Mr. Icahn is demanding from McDonald’s and other companies is completely unfeasible,” McDonald’s said in the statement. It added that Icahn’s campaign has “one certain outcome: a greater financial burden on customers.”

McDonald’s said that it would require at least 300-400 times the animals housed today in “crate-free” systems to keep its supply chain running.

McDonald’s was responding to a letter Icahn sent to the company’s shareholders on Thursday morning in which he called on the fast-food chain to become “an ESG leader in the restaurant and food service industry by setting verifiable targets for improved animal welfare objectives in areas where the company currently exhibits grave shortfalls.”

“McDonald’s inability to fulfill its 10-year-old promise indicates cracks in the board’s highly touted ESG efforts,” Icahn wrote, urging fellow investors to back his two board nominees. Investors will vote at the company’s annual meeting on May 26.

McDonald’s said in its statement that Icahn seeks to replace two current directors with “single-platform nominees that not only lack public company board experience, but also the expertise and qualifications to add meaningful value to the majority of issues regularly faced by the McDonald’s board.”

— Svea Herbst-Bayliss reports on shareholder activism and hedge funds for Reuters from Boston.

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Pershing Square Capital Management and CP on Wednesday said the New York-based hedge fund had sold its remaining 9.8 million shares in the Canadian railroad, representing a 6.51 per cent stake, through trades organized by J.P. Morgan, Credit Suisse and BofA Merrill Lynch.

The sale marks the end of one of Ackman’s most profitable and successful investments, but comes at a time the prominent activist investor is facing double-digit losses in his highly concentrated investment portfolio.

Pershing Square began buying into the underperforming Calgary-based railroad around late September 2011 and mounted one of the hedge fund industry’s bitterest and most closely watched proxy battles, only to win seven seats on the company’s 16-member board in 2012.

In the end, Pershing Square earned some US$2.6 billion on its investment, and Ackman privately said winning the board contest would ensure that no company in the world could afford to ignore his firm.

Ackman said he plans to keep his board seat until the company’s next annual meeting. Earlier this year, Paul Hilal, a key architect of the investment, resigned his CP board seat when he left Pershing Square.

Pershing Square sold down its stake in CP earlier this year but told investors later that it still had full confidence in the railway’s management. Late last year, Ackman played a key role in CP’s efforts to buy rival railroad Norfolk Southern, an effort that eventually collapsed.

While CP will go down as one of Ackman’s big winners, he is currently known more for his fund’s losers — namely his investment in Laval, Que.-based Valeant Pharmaceuticals, which he made in 2015 and which has cost his investors billions in paper losses as the stock price crashed 91 per cent in the last 52 weeks.

Ackman’s exit from CP has some similarities to his exit three years from a losing bet on J.C. Penney; he relied on Citigroup to help him exit an 18 per cent position by selling 39.1 million shares.

— Reporting for Reuters by Allison Lampert and Svea Herbst-Bayliss.

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Mississauga, Ont.-based SunOpta’s share price jumped 26 per cent after the US$4 billion hedge fund asked it to hire an investment bank to look at all ways to increase shareholder value, according to the letter which was in a public filing.

Tourbillon, SunOpta’s biggest investor with a 9.9 per cent stake, said it is going public with its request now after months of private discussions because it worries that management and the board may not be sufficiently committed to boosting the company’s value.

“Simply put, we believe SunOpta can become a more valuable business as a part of a larger enterprise,” Jason Karp, who runs Tourbillon, wrote, according to the letter which was filed with the U.S. Securities and Exchange Commission.

Tourbillon first bet on the Canadian company roughly six months ago. Karp said it has been frustrated by a sagging share price and the company’s failure to turn strong products and services into a “thriving business with an attractive public market valuation.”

The fund said it could eventually push for changes to the board and management if business does not pick up. It also said it would be ready to help if the company wanted to pursue a management buyout, acknowledging that “tough changes may be best addressed in a private setting.”

SunOpta’s share price surged 26.7 per cent to close at $4.84 on Friday and continued to climb some two per cent in after-hours trading. Over the last six months, however, the stock remained down 32 percent.

The company said it will “review Tourbillon’s suggestions and evaluate them on the basis of what is in the best interest of all shareholders.” It also said it “remains focused on creating efficiencies (and) improving operational excellence.”

SunOpta is a leading global organic food company specializing in sourcing, processing and packaging of natural and certified organic food products.

Other big investors in SunOpta include West Face Capital, Daruma Capital Management and Jennison Associates.

SunOpta’s sinking share price has hurt Tourbillon’s returns. The firm, founded by Karp, who once worked for Steven A. Cohen’s SAC Capital Advisors, gained 10 per cent in 2015 when most funds lost money. This year it is off roughly 14 per cent, an investor said.

— Svea Herbst-Bayliss is a Reuters correspondent based in Boston.

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The New York Post, citing unnamed sources, reported Tuesday that the Canadian Competition Bureau has interviewed former Herbalife distributors and can now apply for “information gathering orders.”

The report comes less than a week after U.S. Senator Edward Markey called on two U.S. regulators, the Securities and Exchange Commission and the Federal Trade Commission, to investigate the company, sending the stock down 15 per cent.

A spokesman for the Canadian authority declined to confirm or deny any investigation. A spokeswoman for Herbalife said, “We are unaware of any investigation and have not been contacted.”

Herbalife’s Calgary-based Canadian arm markets products such as protein shakes and powders, teas, skin care products and a weight-management program.

The Competition Bureau in 2004 slapped a C$150,000 fine on one Herbalife distributor, Global Online Systems (GOLS), operating in Canada. The bureau at the time said its investigation found GOLS “was operating a scheme of pyramid selling” involving “health-related products marketed by Herbalife Canada.”

Participants in GOLS’s plan “were compensated for the recruitment of new participants and had to buy specific quantities of products as a condition of joining the plan,” the bureau said at the time.

GOLS and its participants also “recruited new participants by exaggerating income expectations without disclosing the income of a typical participant,” the bureau said, noting its order required GOLS’s operators to disclose the “average income actually received by all participants.”

Herbalife’s share price has been a battleground for billionaire investors for more than a year. William Ackman has accused the company of running a pyramid scheme, something Herbalife vehemently denies, and bet US$1 billion that its share price will go to zero when regulators shut the company down.

On the other side, Carl Icahn and, more recently, William Stiritz are big owners who expect the stock price to go up.

Investors following the Herbalife story speculated that Canada may be investigating the generation of sales leads. The company prohibited “lead generation” methods to find new distributors at the end of June, but Ackman, in a letter to investors sent last year, said those practices, promoted by the company’s top distributors, are still being used.

Herbalife’s Henderson said Canadian sales represent less than one per cent of total sales.

On Monday, Herbalife’s share price climbed 6.7 per cent when Stiritz, Herbalife’s fourth-largest investor, hired Timothy Ramey, a well-known Herbalife analyst, to work for Post Holdings, the company he runs. Stiritz’ investment in Herbalife was made for his private account and had nothing to do with Post, the company said previously. But Ramey, who worked for D.A. Davidson, will be director of strategic ventures at the company Stiritz runs.

Since the start of the year, Herbalife’s share price has dropped 22.43 per cent, which helps shrink the paper loss Ackman’s US$12 billion Pershing Square Capital Management has sustained on the investment he made public in December 2012.

— Svea Herbst-Bayliss is a Reuters correspondent based in Boston. Additional reporting for Reuters by Caroline Valetkevitch and Alastair Sharp. Includes files from AGCanada.com Network staff.

Related story:
CP’s CEO quits ahead of reckoning, May 18, 2012

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