Bunzl PLC (LSE:BNZL) is likely to face growing pressure to reshape its North American business after reports that activist investor Elliott Management has built a stake of almost 5% in the FTSE 100 distributor.
Ahead of an expected trading update next week, Elliott is said to be pushing for a strategic review of Bunzl's largest division and a share buyback worth up to 10% of the company's market value.
Analysts at Stifel said the move was "unsurprising" for the "sleep-easy" Bunzl, given its profit warning last year, which stemmed largely from "self-inflicted execution issues within its North American grocery and foodservice redistribution business, coupled with unusually low levels of M&A in FY25 and a subdued volume outlook".
North America accounts for around 53% of group revenue, generating roughly £6.3 billion of sales in 2025.
While a disposal of the entire division appears unlikely, Stifel believes a review could result in targeted asset sales or a separation of North America Distribution, the group's largest operating company and the business most closely associated with last year's difficulties.
The broker is less convinced by suggestions of a large buyback programme.
"The debate around the use of FCF is interesting, and whilst additional buybacks appear attractive at these levels, we feel inclined to disagree on the quantum of the return given the potential to push leverage above the group's target range should no divestment take place," said analyst Charlie Williams.
"Additionally, given the subdued M&A spend in 2025, we expect 2026 to be a year of good M&A activity, potentially returning the group more in line with its historical compounder status."
With Bunzl's shares still below pre-profit warning levels despite a strong recovery this year, investors will now be looking for signs that management is prepared to respond to Elliott's demands when it provides a trading update next week.
