(Adds investor comment, link to graphic of Chipotle board)
By Lisa Baertlein and Svea Herbst-Bayliss
Dec 16 (Reuters) - Chipotle Mexican Grill Inc, under pressure from activist investor Bill Ackman, named four new board members on Friday, paving the way for a reunion of sorts between its chief executive and a former top executive at McDonald‘s, which once owned the burrito chain.
Matthew Paull, a former McDonald’s Corp chief financial officer, will join the Chipotle board. Media executives Paul Cappuccio and Robin Hickenlooper, as well as Ali Namvar, a partner at Ackman’s hedge fund Pershing Square Capital Management, round out the additions.
Ackman, Chipotle’s largest single investor with a nearly 10-percent stake, sought to end the company’s co-CEO arrangement and replace some long-serving directors with fresh blood, especially in marketing and food safety, according to people familiar with his thinking.
Shares in Denver-based Chipotle jumped 2 percent to $390.25, a boost for Ackman as he tries to pare losses in his investment portfolio that has been battered for the second straight year by its investment in troubled pharmaceuticals firm Valeant .
Chipotle investors are agitating for a deep overhaul at the company, which is struggling to get back on track after a string of 2015 food safety stumbles that bruised sales and its reputation.
The company addressed some of those issues this week with the announced departure of Chipotle co-CEO and director Monty Moran.
But the board “continues to lack the CEO’s desired additional expertise in marketing and branding,” Barclays analyst Jeffrey Bernstein wrote in a research note, calling the additions an overall positive move.
None of the new directors has a food safety background.
Paull is an adviser to Ackman’s $11.5 billion hedge fund and is considered one of his go-to candidates for directorships. He has taken board seats as Ackman’s representative at Air Products and Chemicals Inc and Canadian Pacific Railway Ltd .
Namvar is one of Ackman’s senior investment staffers but has never served on a board.
Cappuccio is executive vice president at Time Warner Inc and Hickenlooper is senior vice president of corporate development at Liberty Global Plc. Hickenlooper, who is married to the governor of Colorado, becomes the second woman on Chipotle’s 12-member board.
“We are pleased that Chipotle has taken the important step of refreshing its board,” Ackman said in a statement.
Paull was McDonald’s CFO from 2001 to 2008 and is credited with making major contributions to a company turnaround.
Paull and Steve Ells, who founded Chipotle and returned to the role of sole CEO this week, worked together under the McDonald’s umbrella until 2006, when the burger giant spun off the burrito seller.
CtW Investment Group, one of Chipotle’s smallest but most vocal investors, urged Ackman this week to use his muscle to convince Ells to step down as board chairman and replace at least two sitting directors with independent board members.
CtW and Amalgamated Bank in November filed a shareholder resolution seeking to replace Ells with an independent chairman, and Amalgamated CEO Keith Mestrich said he planned to discuss the latest changes with the company “in the near future.”
Chipotle’s board has been criticized for being too entrenched and too cozy with management. Five of the eight existing directors have served more than 18 years.
CtW and Institutional Shareholder Services, an influential proxy advisory group, this year urged shareholders to oppose the reelection of directors Patrick Flynn, Darlene Friedman and Albert Baldocchi at the company’s annual meeting in May. The trio survived those challenges.
Reporting by Lisa Baertlein in Los Angeles and Svea Herbst-Bayliss in Boston; Additional reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Saumyadeb Chakrabarty and Jeffrey Benkoe