Vintage Capital Management, which tried to buy Red Robin Gourmet Burgers Inc. last year, has reignited its battle with the distressed casual dining chain.
With Red Robin’s stock falling post-earnings, the activist investor has nominated four executives to the board. They will re-examine options, including a sale, for the Greenwood Village, Colo.-based brand.
The Orlando-based firm, which has an 11.7% stake in Red Robin, said it was skeptical over a multi-year turnaround plan recently revealed by newly installed CEO Paul Murphy.
Murphy’s plan for reigniting sales includes retrofitting kitchens for the Donatos menu expansion and unwinding discounting. The pizza roll out would continue through 2022, with capital investments running at more than $145,000 per restaurant.
On Thursday, the stock was trading midday at about $26 a share, down from $37 a week ago.
Vintage, in a letter sent to Red Robin’s leadership Wednesday, said it is “apparent” that stockholders are skeptical of the strategies laid out by Murphy.
“This reaction strengthens our belief that the Board of Directors has failed to adequately assess several strategic options available to Red Robin, including a sale of the company, refranchising opportunities, non-performing asset monetization transactions, and capital allocation optimization.”
Vintage said the nominated board executives would look at options for the company including considering a sale, something the current board has not been transparent about, the letter states.
“Equally troubling is that we believe that Red Robin’s Board has not been transparent with stockholders about other proposals Red Robin has received from parties who have the obvious financial capacity and motivation to acquire Red Robin,” according to the letter.
The nominees include Anthony Ackil, founder and CEO Streetlight Ventures LLC and former CEO B.Good LLC; Kenneth Todd Evans, vice president, franchise of UBIF Franchising Co.; Stephen J. Lombardo III, chairman and general counsel of Gibsons Restaurant Group; and Craig S. Miller, former president and CEO of Ruth’s Chris Steak House Inc. and current member of the National Restaurant Association.
In regulatory filing released Thursday, Red Robin said it will carefully review Vintage’s proposed director nominees. However, the company noted that it has appointed five “highly qualified” directors over the past seven months including Murphy, Tom Conforti, G.J. Hart, David Pace and Allison Page.
Noting the brand’s undervalued stock, Red Robin also said it plans to initiate a share repurchase program soon.
“The Red Robin Board and management team remain focused on executing the company’s strategic plan while accelerating Red Robin’s turnaround and transforming the business to drive value for all shareholders,” the chain said in its response.
When Red Robin named Murphy CEO last fall, the company also announced its formal rejection of Vintage’s unsolicited buyout offer. The firm in early June called for an auction and said it would buy Red Robin at $40 a share.
Red Robin and its franchisees had 556 restaurants at the end of fiscal 2019, down from 573 in the prior year. Of those, 454 are company owned.
Red Robin reported a net loss of $7.7 million on top of revenue of $302.9 million, which was down 1.2%.
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