Carl Icahn Pursues McDonald’s Pig Sourcing, Nominates 2 Board Members

Billionaire investor Carl Icahn is pursuing fast-food chain McDonald’s Corp. (MCD), to adhere to its commitment to source its supply of pork from “crate-free” producers in the U.S., and has nominated two members to MCD’s Board.

MCD stock closed at $250.60 on February 18. Shares of the fast food chain have lost 6.7% year-to-date vis-à-vis gaining 20.2% over the past year.

McDonald’s 2012 Commitment

Back in 2012, McDonald’s had vowed to shift its U.S. sourcing of pork to “crate-free” producers, an issue which was raised by Icahn and the Humane Society U.S. Both the parties argued that pregnant sows were ill-treated by confining them to small cages, thus leading to sickness and psychological issues.

Ten years down and MCD has not lived up to its promise to fully source pork from such producers. However, the company has been a leader in driving the change and as of today, almost 30% to 35% of U.S. pork producers have moved to group housing for pigs, MCD claimed.

Further, McDonald’s claims that by the end of 2022, it will source about 85% to 90% of its U.S. pork supplies from sows, which are not housed in gestation crates during pregnancy.

McDonald’s uses pork to make its bacon cheeseburgers, breakfast offerings, and its McRib sandwich. The company claims that it sources only 1% of U.S. pork production and neither owns any sows nor engages in the production or packaging of pork in the U.S.

Icahn Nominates 2 Board Members

To ensure that the fast-food chain sticks to its commitment, Icahn has nominated Leslie Samuelrich and Maisie Ganzler to stand for election at the 2022 Annual Meeting.

The investor has around 200 shares of McDonald’s and his push towards the humane treatment of sows stems from his emotional inclination and love towards animals.

Official Statements

Replying to Icahn’s nomination, McDonald’s stated on Sunday that it is on track to sourcing U.S. pork from confirmed pregnant sows not housed in gestation crates by 2024.”

To Icahn’s nominations, the company said it would, “Evaluate the nominees as it would any other candidates proposed to it,” using the Director Selection Process guidelines.

The company even calls Icahn’s stated nomination, “A narrow issue regarding the Company’s pork commitment, which The Humane Society U.S. has already introduced through a shareholder proposal.”

Additionally, Icahn has asked McDonald’s to set time frames for its suppliers to move to crate-free production. To which, the company responded, “While the Company looks forward to promoting further collaboration across the industry on this issue, the current pork supply in the U.S. would make this type of commitment impossible.”

“Furthermore, it reflects a departure from the veterinary science used for large-scale production throughout the industry, and would harm the Company’s shared pursuit of providing customers with high-quality products at accessible prices,” MCD concluded.

Target Price

MCD stock commands a Strong Buy consensus rating based on 22 Buys and 2 Holds. The average McDonald’s price target of $288.14 implies 15% upside potential to current levels.

The company is scheduled to pay its quarterly common dividend of $1.38 per share on March 15, to shareholders on record as of February 28.

Stock Investors

TipRanks’ Stock Investors tool shows that investor sentiment is currently Very Positive on McDonald’s, with 14.3% of portfolios tracked by TipRanks increasing their exposure to MCD stock over the past 30 days.

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