Sodexo's Stock Price Dips Aftter lawmaker requests US Marine Contract Probe
A dip in Sodexo share prices over the last few days seemed to that investors were nervous as news emerged that a U.S. lawmaker has requested a probe of Sodexo's performance on a massive U.S. Marines food service contract. The company's stock price has dropped since a €45.01 close on April 7th.
According to Reuters, Representative Loretta Sanchez "called on the Government Accountability Office" to "investigate key aspects" of an eight-year, $881 million Sodexo food service contract "at mess halls on Marine Corps bases throughout the continental United Stated."
In a press release, Sanchez said that "the government has an obligation to use taxpayer dollars responsibly. There are significant concerns that Sodexo's food services have been more expensive and less effective than originally promised...this is part of a larger effort to target waste in government."
According to the release, here are the circumstances:
· "In 2001, the Marine Corps decided to consolidate its food service contracts at the national level in the hopes that it would save about $20 million per year and free up 594 food specialists for other assignments."
· "To meet these goals and win the new contract, Sodexo proposed centralizing much of the Marine Corps food production at a "cook-chill" facility in Tennessee, where food would be prepared, refrigerated, and shipped around the country for reheating on base."
· "In July 2007, Sodexo terminated its Marine-related operations at the facility even though its 'cook-chill' technology gave Sodexo a competitive advantage during the bidding process."
· "Sodexo's decision came just one month after a voluntary USDA recall of nearly 3,000 pounds of chicken that may have been contaminated with the Listeria bacteria, some of which was shipped to Camp Pendleton and the Marine Corps Recruit Depot San Diego."
· "Public records show that there had been a pattern of food safety problems at the facility both before and after the USDA recall, including 70 USDA records of food safety noncompliance between December 2005 and September 2009."
As the current contract expires, Sodexo and other contractors, including Compass Group and Aramark, are hoping to win the account, which the London Evening Standard estimates is worth approximately $1.4 billion.
A trader was quoted as saying that "there is concern that Sodexo's offer is more expensive and less attractive than it was initially."