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Exclusive-US Foods seeks new top executives amid investor pressure -sources

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November 5, 2021

By Jessica DiNapoli and Svea Herbst-Bayliss

(Reuters) – US Foods Holding Corp is seeking to hire a chief operating officer and replace its chief financial officer as it faces pressure from an activist investment firm to improve its operations, according to people familiar with the matter.

US Foods, the largest U.S. food distributor after Sysco Corp, has been grappling with labor shortages and supply chain issues since the onset of the COVID-19 pandemic.

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While demand has picked up in the last few months with customers returning to restaurants it supplies, US Foods’ profitability has yet to return to pre-pandemic levels because it is forced to pay more to retain workers.

Sachem Head Capital Management LP, a New York-based firm run by hedge fund veteran Scott Ferguson, said in a regulatory filing last month that it owned 5.1% of US Foods’ common stock and that it may seek to speak with the company’s management and organize with other shareholders.

It also said it was being advised by Avis Budget Group Inc Executive Chairman Bernardo Hees, who as a partner at private equity firm 3G Capital developed a reputation for implementing draconian cost cuts. He practiced such austerity as chief executive officer of fast-food restaurant chain Burger King Worldwide Holdings Inc and then as CEO of food giant Kraft Heinz Co.

The management shake-up under way at US Foods offers the clearest indication yet that the Rosemont, Illinois-based company is pursuing changes as it prepares to defend itself against a possible board challenge from Sachem Head.

The company has not had a chief operating officer since 2015, when Stuart Schuette announced he would leave and then became chief executive of American Tire Distributors. It is now looking for a chief operating officer, the sources said, speaking on condition of anonymity.

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Dirk Locascio has been US Foods’ CFO since 2017. The company has been searching for his replacement, the sources said.

Pietro Satriano became US Foods’ CEO in 2015 after a federal judge blocked the company’s sale to Sysco. It is not clear how long he will remain with the company, which does not have employment agreements with any of its executives, according to a regulatory filing. One of the sources said US Foods’ board of directors has in recent months deliberated about Satriano’s succession.

“The company does not comment on rumors,” a company spokesperson said.

US Foods was previously owned by buyout firms Clayton, Dubilier & Rice LLC and KKR & Co Inc, which took it public in 2016. It now has a market value of $8.2 billion.

US Foods has been trying to address soaring price inflation and labor shortages that have led to inventory write-offs and higher distribution costs.

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It has sought to improve working conditions by capping the number of hours a new employee works and offering more bonuses, according to BTIG analysts.

Still, its profitability stood at 15.3% in the three months to July 3, compared with 17.7% in the corresponding period two years ago, before the pandemic hit. The company will report quarterly earnings on Monday.

(Reporting by Jessica DiNapoli in New York and Svea Herbst-Bayliss in Boston; editing by Jonathan Oatis)

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Amazon asks India antitrust body to revoke Reliance-Future deal approval

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November 28, 2021

By Aditya Kalra and Abhirup Roy

NEW DELHI (Reuters) – Amazon has asked India’s antitrust regulator to revoke its approval for Future Retail’s $3.4 billion sale of retail assets to Reliance, saying it was “illegally obtained”, violating an order suspending the deal, a letter seen by Reuters shows.

The approval for the deal was a “nullity in the eyes of law” as an arbitrator’s order was still in force, according to the letter sent by Amazon.com Inc to the Competition Commission of India (CCI) last week.

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The battle between two of the world’s richest men, Amazon founder Jeff Bezos and Reliance Industries Ltd boss Mukesh Ambani, marks a contest for preeminence in India’s booming, nearly trillion-dollar retail market.

The winner in the fight for Future Retail Ltd, India’s second-largest retailer and Amazon’s estranged local partner, will get pole position in the race to meet the daily needs of more than a billion people.

The CCI, Amazon, Future Group and Reliance did not respond to requests for comment.

Future has said the arbitrator’s suspension order was invalid but Indian courts have declined to overturn it.

If the regulator agrees with the previously unreported letter, it would be a major setback for oil-to-telecom conglomerate Reliance.

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Amazon won an injunction against the deal from a Singapore arbitrator last year, alleging Future had violated contracts that prevented it from selling the assets to entities including Reliance.

But the CCI later cleared the deal.

Future misled the CCI and continued to seek approval for the deal, Amazon said in the letter dated Wednesday, calling the injunction a “brazen attempt to subvert the rule of law”.

Amazon asked for a personal hearing from the CCI to make its case.

The letter comes as Amazon is also battling allegations that it misrepresented facts and concealed information while seeking antitrust clearance for a 2019 deal with Future Group.

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Amazon has so far successfully used this deal’s contracts to block Future’s deal with Reliance.

(Reporting by Aditya Kalra and Abhirup Roy in New Delhi; Additional reporting by Zeba Siddiqui; Editing by William Mallard)

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Exclusive-Visa complains to U.S. govt about India backing for local rival RuPay

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November 28, 2021

By Aditya Kalra

NEW DELHI (Reuters) – Visa Inc has complained to the U.S. government that India’s “informal and formal” promotion of domestic payments rival RuPay hurts the U.S. giant in a key market, memos seen by Reuters show.

In public Visa has downplayed concerns about the rise of RuPay, which has been supported by public lobbying from Prime Minister Narendra Modi that has included likening the use of local cards to national service.

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But U.S. government memos show Visa raised concerns about a “level playing field” in India during an Aug. 9 meeting between U.S. Trade Representative (USTR) Katherine Tai and company executives, including CEO Alfred Kelly.

Mastercard Inc has raised similar concerns privately with the USTR. Reuters reported in 2018 that the company had lodged a protest https://reut.rs/3cQA2La with the USTR that Modi was using nationalism to promote the local network.

“Visa remains concerned about India’s informal and formal policies that appear to favour the business of National Payments Corporation of India” (NPCI), the non-profit that runs RuPay, “over other domestic and foreign electronic payments companies,” said a USTR memo prepared for Tai ahead of the meeting.

Visa, USTR, Modi’s office and the NPCI did not respond to requests for comment.

Modi has promoted homegrown RuPay for years, posing a challenge to Visa and Mastercard in the fast-growing payments market. RuPay accounted for 63% of India’s 952 million debit and credit cards as of November 2020, according to the most recent regulatory data on the company, up from just 15% in 2017.

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Publicly, Kelly said in May that for years there was “a lot of concern” that the likes of RuPay could be “potentially problematic” for Visa, but he stressed that his company remained India’s market leader.

“That’s going to be something we’re going to continually deal with and have dealt with for years. So there’s nothing new there,” he told an industry event.

‘NOT SO SUBTLE PRESSURE’

Modi, in a 2018 speech, portrayed the use of RuPay as patriotic, saying that since “everyone cannot go to the border to protect the country, we can use RuPay card to serve the nation.”

When Visa raised its concerns during the USTR gathering on Aug. 9, it cited the Indian leader’s “speech where he basically called on India to use RuPay as a show of service to the country,” according to an email U.S. officials exchanged on the meeting’s readout.

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Finance Minister Nirmala Sitharaman said last year that “RuPay is the only card” banks should promote. The government has also promoted a RuPay-based card for public transportation payments.

While RuPay dominates the number of cards in India, most transactions still go through Visa and Mastercard as most RuPay cards were simply issued by banks under Modi’s financial inclusion programme, industry sources say.

Visa told the U.S. government it was concerned India’s “push to use transit cards linked to RuPay” and “the not so subtle pressure on banks to issue” RuPay cards, the USTR email showed.

Mastercard and Visa count India as a key growth market, but have been jolted by a 2018 central bank directive for them to store payments data “only in India” for “unfettered supervisory access”.

Mastercard faces an indefinite ban on issuing new cards in India after the central bank said it was not complying with the 2018 rules. A USTR official privately called the Mastercard ban “draconian”, Reuters reported in September.

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(Reporting by Aditya Kalra in New Delhi; Editing by William Mallard)

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‘Flash mob’ thieves target U.S. retail stores on Black Friday

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November 28, 2021

By Steve Gorman

LOS ANGELES (Reuters) – Black Friday shoppers weren’t the only ones out hunting for bargains on the day after Thanksgiving. Thieves were busy as well.

Police in Los Angeles and cities elsewhere across the country spent much of their holiday weekend patrols looking for suspects in a spate of “flash mob” robberies on Friday, part of a surging U.S. crime trend in which groups of thieves swarm a store, ransack the shelves and flee.

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Authorities also have used the term “smash-and-grab” to describe the trend.

At least two such robberies were reported on Saturday by the Los Angeles Police Department (LAPD) and the Los Angeles County Sheriff’s Department. A local television station, KCAL-TV, counted a total of six smash-and-grab heists on the city’s west side alone on Friday.

In one incident, a group of eight men entered a Home Depot outlet at a shopping mall in Lakewood, south of downtown Los Angeles, walked directly to the tool aisle and snatched a bunch of hammers, sledgehammers and crowbars valued at about $400 before making their getaway, the sheriff’s office said.

According to L.A. television station KTTV, the Home Depot robbery on Friday night involved up to 20 suspects who pulled up to the store in as many as 10 cars and donned ski masks before raiding the tool aisle.

“We tried to stop them,” store employee Luis Romo told KTTV. “We closed the front entrance, and they put their sledgehammers up and whoever got in the way, they were going to hurt them.”

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The Los Angeles City News Service said four suspects in that robbery were arrested on Saturday by Beverly Hills police.

In a similar incident Friday afternoon, a group of 10 men or more invaded a store in the city’s Fairfax district and started grabbing merchandise without paying for it, pushing employees out of the way before fleeing the scene, according to LAPD.

Police are investigating possible ties between that incident and a flurry of other robberies and retail thefts on Friday and earlier in the week, including two smash-and-grabs reported on Wednesday, an LAPD spokesperson said.

The rash of retail crime prompted the LAPD to place its officers on a citywide tactical alert on Friday afternoon.

Mass robberies also were reported on Friday at two Best Buy electronics stores in the Minneapolis-St. Paul area, one of them involving as many as 30 suspects, while a spree of pre-dawn retail burglaries were under investigation in Chicago.

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In one of the biggest flash-mob robberies reported on the West Coast in recent days, police in the San Francisco suburb of Walnut Creek were seeking about 80 suspects who swarmed and ransacked a department store last Saturday.

(Reporting by Steve Gorman in Los Angeles; Editing by Paul Simao)

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