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Vintage Capital demands ouster of 5 Red Robin board members

Activist investor, which offered to buy Red Robin last week, calls for special shareholder meeting

Vintage Capital Management LLC has called for a special Red Robin Gourmet Burgers Inc. shareholder meeting, where the private-equity firm plans to demand new board leadership that will support a sale of the company.

Specifically, Vintage, which is the company’s third largest stockholder, wants to remove and replace five board members, according to a regulatory filing made Wednesday.

"We are dismayed that the board has not announced a formal process to explore strategic alternatives nor has the board or its advisers reached out to us to discuss our proposal,” Vintage said in a letter to management included in its Securities and Exchange Commission filing.

“At this meeting, we intend to propose, among other things, to remove five directors, representing a majority of the board, and direct the replacement of those directors with highly qualified directors who, in accordance with their fiduciary duties, would be directed to promptly commence a comprehensive review of strategic alternatives, including a sale of the company,” said Vintage, which holds 1.5 million Red Robin shares or about 11.5% of shares outstanding.

Vintage’s request to oust board leaders comes a week after the firm’s takeover offer of the struggling Greenwood Village, Colo.-based casual-dining brand. Last week, Vintage sought to buy the company for $40 per share.

Vintage said it would consider halting the special meeting request if the Red Robin board demonstrates that it is “diligently” pursuing a robust strategic review process by June 29.

“Vintage would participate in that process,” the company stated. “We would agree to a customary standstill that would remain in effect until the earlier to occur of 90 days from the execution of the agreement or the company ceasing to use diligent efforts to pursue a sale of the company.”

In a statement issued Wednesday afternoon, Red Robin’s management defended its board, calling all seven members “established industry leaders” who are actively “engaged and committed to enhancing stockholder value.”

“The Board will carefully review Vintage’s request to convene a special meeting of Red Robin stockholders and respond in due course,” the company stated in a regulatory filing.

Last week, the chain said Vintage’s takeover offer took them by surprise.

“In multiple conversations with Vintage, we have expressed our openness to Vintage’s participation in our ongoing search to identify a world-class CEO and to maintaining a constructive dialogue,” the company said. “Given our dialogue to date, we were surprised by the content of the letter we received today, as Vintage has not been willing to propose any CEO candidates.”

Red Robin has stumbled financially, putting pressure on the brand’s leadership. Same-store sales for the first quarter of 2019 fell 3.3%. Traffic was down 5.5%. In April, CEO Denny Marie Post retired. Board chair Pattye Moore took over as interim CEO. A search is underway for a replacement.

Red Robin’s board has taken measures to forestall a hostile takeover, including exercising a so-called “poison pill” to make such a takeover more expensive.

At the end of May, the chain closed 10 underperforming locations, including seven in malls, that it said were dragging down overall sales at the chain.

Red Robin has about 560 restaurants in the United States and Canada.

Update, June 20, 2019: This story was edited to include a response from Red Robin's management.

Contact Nancy Luna at [email protected]

Follow her on Twitter: @FastFoodMaven

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