Jana cuts ​Jack in the Box stake to near minimum level for board representation

Jana Partners, with its decision to sell hundreds of thousands of Jack in the Box shares, is at the lower limit of the number of shares it must hold to gain representation on the company's board.

On Oct. 25, San Diego, California-based Jack in the Box reached a deal to allow Jana to add two independent directors to its board, one of whom could be a Jana employee. The agreement would increase the board’s size from nine to 11 directors.

However, the terms of the agreement specified that if Jana and its affiliates failed to maintain a net long position in the company of at least 3.35 percent, then the agreement, and the company’s obligations under it, would “terminate immediately.”

Having sold more than half its stake in recent weeks, Jana now holds 864,431 shares, or a 3.4 percent stake, according to regulatory filings.

Neither Jana or Jack in the Box responded to requests for comment on this story.

The deal started to show signs of stress earlier this month when the company revised the original agreement to delay the deadline for Jana to select its nominees to March 15 from Jan. 8.

Since then, Jana has been selling shares at an accelerating pace, but at a sizable loss to its initial investment.

Since the start of the year, Jana has sold almost a million shares in Jack in the Box, at an average of less than $81 per share. Jana’s stake, which peaked at around 7.3 percent in February 2018, was acquired at a cost of around $90 per share.

Meanwhile, activist fund Blue Harbour appears to be waiting in the wings. On Nov. 9, the activist fund disclosed a 6.8 percent stake in Jack in the Box, acquired at an average cost of around $79 per share.

There is no relationship between Jana and Blue Harbour in relation to this deal, and MLex has learned the latter fund is currently not involved in the director identification process.