May 27, 2016 / 10:22 PM / 2 years ago

UPDATE 1-Hedge fund Tourbillon urges SunOpta to sell itself; shares jump

(New throughout, adds details on Tourbillon’s plans, updates share price, fund performance)

By Svea Herbst-Bayliss

May 27 (Reuters) - Hedge fund Tourbillon Capital Partners LP is urging organic food company SunOpta Inc. to sell itself to a bigger rival, according to a letter sent to the company on Friday.

The Canadian company’s share price jumped 26 percent after the $4 billion hedge fund asked it to hire an investment bank to look at all ways to increase shareholder value, according to the letter which was in a public filing.

Tourbillon, SunOpta’s biggest investor with a 9.9 percent stake, said it is going public with its request now after months of private discussions because it worries that management and the board may not be sufficiently committed to boosting the company’s value.

“Simply put, we believe SunOpta can become a more valuable business as a part of a larger enterprise,” Jason Karp, who runs Tourbillon, wrote, according to the letter which was filed with the U.S. Securities and Exchange Commission.

Tourbillon first bet on the Canadian company roughly six months ago. Karp said it has been frustrated by a sagging share price and the company’s failure to turn strong products and services into a “thriving business with an attractive public market valuation.”

The fund said it could eventually push for changes to the board and management if business does not pick up. It also said it would be ready to help if the company wanted to pursue a management buy-out, acknowledging that “tough changes may be best addressed in a private setting.”

SunOpta’s share price surged 26.70 percent to close at $4.84 on Friday and continued to climb some 2 percent in after hours trading. Over the last six months, however, the stock remained down 32 percent.

The company said it will “review Tourbillon’s suggestions and evaluate them on the basis of what is in the best interest of all shareholders.” It also said it remains focused on creating efficiencies and improving operational excellence.”

Toronto-based SunOpta is a leading global organic food company specializing in sourcing, processing and packaging of natural and certified organic food products.

Other big investors in SunOpta include West Face Capital, Daruma Capital Management and Jennison Associates.

SunOpta’s sinking share price has hurt Tourbillon’s returns. The firm, founded by Karp, who once worked for Steven A. Cohen’s SAC Capital Advisors, gained 10 percent in 2015 when most funds lost money. This year it is off roughly 14 percent, an investor said. (Editing by Jeffrey Benkoe and David Gregorio)

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