Today, shares of Dollar Tree (NASDAQ:DLTR) are trading higher by 14% after activist investor Mantle Ridge initiated a $1.8 billion stake in the discount retailer. The multibillion-dollar investment amounts to owning more than 5% of all shares outstanding, making Mantle Ridge one of the top two shareholders of Dollar Tree stock.
Why This Makes Sense for Dollar Tree Stock
Shareholders of Dollar Tree stock seem to be on board with Mantle Ridge’s investment, as evidenced by the positive price performance today.
Mantle Ridge’s activist investment will bring Richard Dreiling, former CEO of Dollar General (NYSE:DG), on board as a consultant for Dollar Tree. Dreiling is known for turning Dollar General into a well-run business in the early 2010s. It has also been reported that Mantle Ridge plans on nominating new members to the Dollar Tree board of directors when the window opens on Nov. 24. The entire board is up for re-election this year.
Dollar Tree stock has returned 22% year t0 date (YTD), trailing the S&P 500’s return of 26%. Prior to Mantle Ridge’s investment announcement, DLTR had only returned 7% YTD.
Let’s take a deeper look into the activist investor making headlines today.
What Is Mantle Ridge?
- Paul Hilal is the CEO and founder of Mantle Ridge. Prior to founding Mantle Ridge in 2016, Hilal worked alongside activist investor Bill Ackman at Pershing Square.
- Before joining Pershing Square, Hilal founded and served as the managing partner of Caliber Capital Management.
- Hilal obtained his A.B. degree in biochemistry from Harvard College in 1988, a J.D. from Columbia University Law School in 1992, and an M.B.A. from Columbia University School of Business in the same year.
- According to its website, Mantle Ridge “seeks to help create enduring value, and believes that constructive and cooperative engagement between boards, management teams, and engaged shareholders is the best means to that end.”
- In early 2017, Mantle Ridge led its first major activist campaign to instill Hunter Harrison as the CEO of CSX (NASDAQ:CSX).
- The campaign was successful, and Hilal was named vice chairman of the board of CSX.
- Shares of CSX have increased by 117% since Mantle Ridge’s investment.
- Mantle Ridge’s second major activist investment was Aramark (NYSE:ARMK), a food services and facilities corporation. In late 2019, Mantle Ridge acquired a roughly 20% stake in ARMK stock in the hopes of replacing the CEO and several members on the board of directors.
- The campaign was successful and resulted in Aramark replacing their CEO and several members on the board of directors. Hilal was also appointed as vice chairman of the board.
- Shares of ARMK have inched higher by 2% since Mantle Ridge’s investment.
On the date of publication, Eddie Pan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
