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Jamba plans more refranchising, share buybacks

Jamba plans more refranchising, share buybacks

Operator faces a proxy contest by JCP Investment Partnership

Jamba Inc. will sell company units and buy back shares of its stock more aggressively, the company said Monday, amid a multipronged threat to its board from a pair of activist investors.

Last week, Jamba said hedge fund JCP Investment Partnership nominated six people for election to its nine-person board of directors, a move that, if successful, would effectively give the activist control of the operator of 862 Jamba Juice units.

JCP has yet to file a form 13D with the SEC, which would indicate that it has an activist investment in Jamba. There have been no communications with the company that have been made public.

According to an SEC filing by Jamba last week, JCP owns 2.3 percent of Jamba stock. The company also said it would review the board nominations.

JCP is no stranger to the restaurant industry, having made activist investments in KFC franchisee Morgan’s Foods Inc. and Big Apple Bagels parent BAB Inc.

In July, another hedge fund, Engaged Capital, filed documents with the SEC, saying it had 7 percent of the company’s stock and planned to push for changes.

Those changes included decreasing general and administrative costs, refranchising more units, eliminating spending on unprofitable growth initiatives, and eliminating unprofitable New York locations, according to the filing. Jamba said last week it planned to take many of these actions.

“Over the past several months, we have been working diligently to identify cost reductions and accelerate our transition to an asset light model, which we believe will enable our company to drive growth and shareholder value,” Jamba CEO James White said in a statement last week.

All of the changes Jamba announced last week were pushed by Engaged Capital, and all are often strategies activists promote to increase share value.

Jamba’s stock has risen 4.4 percent this year, roughly in line with the broader restaurant industry on Wall Street.

Last month, Jamba said it would sell 114 company-owned locations to franchisees. It wants to sell those units by the first half of next year as part of an effort to reduce company ownership of the system to about 20 percent.

On Monday, Jamba said it had hired Peak Franchise Capital to lead the sale. Peak has helped with the sale of over $1 billion worth of franchises. The Jamba units to be sold are located in San Francisco, San Diego and Sacramento.

White said in a statement that the company would sell units to “experienced operators who are financially qualified to grow.”

Jamba also wants to buy back stock. The company said Monday it has adopted a share repurchase plan under federal regulations to buy back $25 million worth of shares. Companies buy back stock as a way to boost stock price, because their earnings are spread over a smaller number of shares, thus increasing the value of an individual share.

In addition, Jamba last week said it is working with the consulting firm Capgemini to identify cost savings and increase “workflow efficiencies” to reduce general and administrative by about 20 percent, or $30 million.  

Jamba is the latest in a string of restaurants targeted by activist investors. Activists this year have fought proxy campaigns against Bob Evans Farms Inc. and Darden Restaurants Inc. Activists have also filed documents on Popeyes Louisiana Kitchen Inc.

In both the Bob Evans and Darden proxies, activists sought control of the company by overturning more than half of the board director seats. In Darden’s case, activists won all 12 seats. In Bob Evans’ case, activists fell short but still gained four seats.

Contact Jonathan Maze at [email protected].
Follow him on Twitter: @jonathanmaze

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