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Buffalo Wild Wings decries activist’s ‘risky’ strategies

Company responds to activist investor Marcato Capital Management

Buffalo Wild Wings Inc. on Monday issued a full-throated defense of its performance and stock price, and vowed that it wouldn’t support the “risky financial engineering strategies” of activist shareholder Marcato Capital Management.

The Minneapolis-based chicken-wing chain, facing an aggressive proxy fight against Marcato, took aim at the shareholder’s plan to refranchise most company-owned units in documents filed with the SEC on Monday.

Marcato wants Buffalo Wild Wings to sell most of its company-owned units to franchisees, arguing that franchise operators run more profitable restaurants.

Buffalo Wild Wings has announced plans to refranchise 70 restaurants, but argued that Marcato’s “vastly more aggressive and unproven plan … simply does not pencil out.”

“Given our focus on extending our successful, long-term track record, we will not support risky financial engineering strategies that provide an unlikely and modest short-term benefit, but create substantial long-term risk,” the company’s board said in a letter to shareholders.

Marcato did not comment on Buffalo Wild Wings’ filing, and referred only to its existing filings.

Buffalo Wild Wings and Marcato are fighting for shareholder votes on three seats to the company’s board of directors that would give the activist considerable say in how the company operates. Buffalo Wild Wings has itself nominated one of Marcato’s nominees, Sam Rovit.

Last week, Marcato asked for the resignation of Buffalo Wild Wings CEO Sally Smith, essentially making the vote a referendum on her tenure at the company.

Buffalo Wild Wings said Monday that Smith’s tenure has been a strong one. The company said its stock price has increased nearly 1,700 percent since its IPO in 2003, compared with 124-percent growth for casual-dining chains and 329-percent growth for restaurants overall. 

“Our record of outstanding performance is compelling,” Buffalo Wild Wings said. “If you invested with us at our IPO, 10 years ago, five years ago or even a year ago, you have earned a return that exceeds the median return generated by other casual-dining restaurant companies.”

In addition to Rovit, Buffalo Wild Wings has nominated former McDonald’s USA president Janice Fields to the board. Fields, Rovit and three others appointed in October — Andre Fernandez, Harry Lawton and Harmit Singh — would give the company five new board members.

Marcato has nominated former Pizza Hut CEO Scott Bergren, former Buffalo Wild Wings executive Lee Sanders, and Marcato founder Mick McGuire, in addition to Rovit.

In its filing, Buffalo Wild Wings said that Bergren refused to be interviewed by the company’s chairman during its nominee vetting process. It added that Sanders “vastly exaggerates his achievements at Buffalo Wild Wings.”

Sanders was senior vice president of development and franchising from 2001 through 2007. On its website, winningatwildwings.com, Marcato said that he “successfully planned and led the national rollout and opening of 486 units within seven years, driving annual retail sales to $2.5 billion for the 1000+ unit chain.” 

Contact Jonathan Maze at [email protected]

Follow him on Twitter: @jonathanmaze

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