This post is part of the On the Margin blog.
Negotiations between Bravo Brio Restaurant Group Inc. and its largest shareholder over board membership and voting became public this week, when the two sides started sending letters to one another — via press release.
On Tuesday, TAC Capital LLC, Bravo Brio’s largest shareholder, made public a letter it sent to the company’s board, recommending changes in voting procedures and complaining about a lack of public results from its work with an investment banker earlier this year.
In the letter, the shareholder said it “declined to nominate directors at this time,” saying that at most TAC would have “a minority vote on a consistently dysfunctional board.”
The next day, Bravo Brio revealed that it has, indeed, offered the investor three seats on its 10-person board of directors.
That was the number of board members TAC nominated back in January.
“While we believe that a continuation of our private dialogue would have been more productive, since you have chosen the press release route, we believe it is appropriate to respond in kind so there is a more complete body of information that is publicly available,” the Bravo Brio board wrote in response.
The board said that it has talked with TAC and offered the shareholder three seats, giving it 30 percent of board membership, “Which represents approximately double your ownership level.” (TAC owns 14.5 percent of Bravo Brio stock.)
The back-and-forth between Bravo Brio and its activist seems more like a pillow fight than an actual activist incursion.
Bravo Brio owns the Italian casual-dining chains Bravo Cucina Italiana and Brio Tuscan Grille. The chain’s stock has been heading steadily south since peaking at more than $25 a share in 2011. It has lost nearly half of its value so far this year — it currently trades at about $2.10 per share. The stock barely gets attention on the public markets.
The biggest problem at the company has been sales. Same-store sales have declined each year since 2013. They will likely decline again this year.
TAC has been poking the company since at least January, when it nominated three independent directors to the company’s board. The company offered two. Then, in February, Bravo Brio said it started working with an investment banker on strategic alternatives.
That typically means a sale — though casual-dining chains with long histories of sales problems generally don’t get much interest from prospective buyers. Indeed, scant has been heard about those efforts since then.
In his latest letter, TAC Chairman Donald Adam decried a lack of information about that effort.
“Our concerns are exacerbated by BBRG’s failure to publicly disclose the results from its reported engagement of an investment banker earlier this year,” Adam wrote.
“Surely, after eight months, the board has information it can report to the owners of BBRG and how it will create shareholder value,” he added.
The strangest element, however, was the decision not to put nominees on the company’s board, especially given the fact that Bravo Brio is now offering the investor all it originally wanted in terms of board membership.
Instead, Adam now wants the company to change voting procedures, by allowing all directors to be elected annually, to require their election by a majority of shareholders and to enable shareholders to call a special meeting.
For its part, the Bravo Brio board said it is “open to shareholder input,” and will “consider the suggestions” the investor has made.
Jonathan Maze, Nation’s Restaurant News senior financial editor, does not directly own stock or interest in a restaurant company.
Contact Jonathan Maze at [email protected]
Follow him on Twitter: @jonathanmaze