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By Svea Herbst-Bayliss
NEW YORK(Reuters) - Jana Partners is working with a sixth executive to push for changes at Lamb Weston, signaling the activist investor may seek to replace the majority of the french fry maker's board, according to a regulatory filing made on Friday.
Potato industry veteran Jeff Delapp, who previously served as president of Lamb Weston and then as president of Lamb Weston competitor McCain Foods, North America, joined the fund's lineup of executives who could become board candidates.
Jana Partners owns more than 5% of Lamb Weston and has been pushing the company to improve operations and capital allocation or put itself up for sale.
Last week, disappointing Lamb Weston earnings sent the stock price tumbling as much as 20%. Since January Lamb Weston shares have dropped 39%. The company also made an unexpected CEO change when it said it was replacing Chief Executive Officer Tom Werner with Chief Operating Officer Michael Smith. It said the "appointment represents the culmination of a thoughtful, year-long succession planning process."
Lamb Weston said it swung to a $36 million loss in its fiscal second quarter after a drop in sales and blamed softer demand and higher manufacturing costs. It cut its earnings outlook for the full year.
Jana is now ratcheting up pressure on the board after calling last week's earnings a "disaster" and saying Smith, as part of the executive team, is "complicit in (Lamb Weston's) widespread operational and strategic debacle."
Wall Street analysts interpreted last week's news to suggest the chances for a Lamb Weston transaction are growing. Jefferies analyst Rob Dickerson wrote the CEO change "feels like a panicked move" and Barclays analyst Andrew Lazar wrote that last week's guidance and stock move "could make future strategic changes even more likely." Reuters reported earlier this month that Post Holdings is working with bankers on a possible Lamb Weston deal.
Jana, which often partners with strategic and operating partners, said in an earlier filing that it is working with Continental Grain and that several executives, including former Lamb Weston Executive Chairman Timothy McLevish, could be nominees.
Lamb Weston's last annual meeting was held in September.
(Reporting by Svea Herbst-Bayliss; editing by Diane Craft)