On the Margin
When an activist arrives, the CEO usually goes

When an activist arrives, the CEO usually goes

This post is part of the On the Margin blog.

As Lisa Jennings reported yesterday, James White retired as CEO of Jamba Juice. It wasn’t surprising.

That’s not a commentary on the job White did. It is the simple reality at restaurant companies that get activist investors: Sooner or later, those situations result in the departure of the CEO.

Sometimes, the resignation comes before shareholders get the chance to vote in a proxy. Last July, Clarence Otis, the longtime CEO at Darden Restaurants, stepped down as the activist investor Starboard Value sought to overhaul the company’s board.

And sometimes, the departure comes after the vote, as in the case at Bob Evans Farms Inc., where CEO Steve Davis retired months after activists took seats on that company’s board.

There are more examples. In 2010 Nelson Marchioli stepped down as CEO at Denny’s amid activist pressure at the time. The company would go on to name John Miller as CEO. That same year, Steve Carley was named CEO at Red Robin Gourmet Burgers Inc. amid an activist fight at the time.

The next year, Michael Woodhouse left as CEO at Cracker Barrel, and was replaced by Sandra Cochrane.  

In each of those three cases, the company would fend off the activists during proxy fights. But it can hardly be argued that the changes made at the top haven’t been good for those respective companies — all of which have performed remarkably well in the years since.

But sometimes it doesn’t quite work out as planned. A host of activists took positions in Famous Dave’s in 2013, and early in 2014 Ed Rensi was named CEO of the company — generating a surge in excitement among Wall Street investors. Thirteen months later Rensi stepped down.

By all these measures, White lasted a long time, several months after Jamba Juice named a pair of activists to the company’s board, which fended off a fight for control at the company.

And under White, Jamba has done just about everything an activist would want, refranchising company stores and spending money on stock buybacks. And the company is projecting strong third quarter same-store sales growth of 4 to 5 percent, a remarkable turnaround from the 3.9-percent decline in the second quarter.

Indeed, one analyst told the Wall Street Journal that, “maybe James just feels he’s completed the task.”

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