The Case for a Strategic Sale of UniFirst Corporation: Unlocking Shareholder Value Through Immediate Action

The corporate governance failures at UniFirst Corporation have reached a critical junction, creating a perfect storm of mispricing, strategic inertia, and shareholder distrust. As a controlled company with a board dominated by the Croatti family's Class B shares, UniFirst has repeatedly prioritized internal interests over value creation, culminating in a governance crisis that demands urgent action. The case for a strategic sale is not merely speculative-it is a logical imperative supported by both market dynamics and academic insights into the consequences of weak governance in controlled firms.

Governance Failures and the Cost of Inaction

UniFirst's governance issues trace back to the mishandled leadership succession following the death of founder Ron Croatti in 2017. Despite Ron's public commitment to promote his son Michael Croatti, the board instead appointed Steven Sintros as CEO and later elevated Cynthia Croatti, a former HR executive, to the role of Special Consultant and Advisor to the CEO. This decision, which directly contradicted the founder's stated wishes, marked the beginning of a decline in both performance and morale. Engine Capital, a 3.2% shareholder, has since criticized the board for a lack of accountability and a failure to execute a credible turnaround plan.

The board's recent rejection of a $275-per-share acquisition offer from Cintas Corporation in 2025 further underscores its inability to act in shareholders' best interests. This decision, coupled with the refusal to engage with potential buyers since a $255-per-share offer in 2022, has left UniFirst's stock significantly undervalued relative to its strategic potential. The governance structure itself exacerbates these issues: the board's reliance on Michael Patrick has introduced a material conflict of interest that undermines decision-making.

Controlled Companies and the Mispricing Paradox

UniFirst's situation is emblematic of a broader issue in controlled companies, where concentrated ownership often leads to governance inefficiencies and equity mispricing. Academic studies from 2025 highlight that weak corporate governance in such firms correlates with valuation inefficiencies, as controlling shareholders may prioritize personal interests over transparency and accountability. For example, a 2025 paper on Jordanian companies found that independent board directors and audit committee expertise significantly reduce the risk of financial statement fraud-a concern that resonates with UniFirst's opaque governance practices.

The mispricing of UniFirst's stock is stark. While the company's current share price of $177.15 appears modestly above its estimated fair value of $165.50, the valuation gap between its standalone market price and what a strategic acquirer like Cintas could offer remains substantial. Analysts at Barclays and activist groups like Engine Capital argue that operational improvements-such as ERP system upgrades or expanded distribution centers-will not close this gap within a reasonable timeframe. A strategic sale, by contrast, would immediately unlock value for shareholders while addressing the governance flaws that have eroded trust.

Market Reactions and the Path Forward

The proxy battle between Engine Capital and UniFirst's board has intensified scrutiny on the company's governance structure. Engine Capital's push to add two directors, including Michael Croatti, reflects a broader demand for independent oversight and a renewed focus on shareholder value. The firm's call for a special committee with its own legal and financial advisors mirrors academic recommendations for mitigating agency problems in controlled companies.

Market reactions to this activism have been mixed. While the proxy contest has introduced governance uncertainty, it has not yet disrupted UniFirst's core investment narrative of operational improvements and margin expansion. However, the board's decision to hold a virtual-only annual meeting on December 15, 2025, has drawn criticism for favoring controlling trustees over other shareholders. This move, combined with the rejection of Cintas' offer, has further eroded confidence in the board's ability to act impartially.

Conclusion: A Strategic Sale as the Only Viable Path

The academic and market evidence is clear: UniFirst's governance failures have created a mispricing that cannot be resolved through internal reforms alone. The company's controlled structure, coupled with a history of poor decision-making, has left it vulnerable to strategic stagnation. A strategic sale would not only address these governance flaws but also align with broader trends in corporate governance research, which emphasize the importance of board independence and shareholder rights in driving value.

For UniFirst's board, the choice is stark. To reject a sale process is to continue compounding the damage to the company's competitive position and the Croatti family legacy. For shareholders, the message is equally clear: the time for action is now.