Buffalo Wild Wings Hits Back at Activist Investor
Tension flared up on Monday between Buffalo Wild Wings and the activist investor seeking control of the company.
The Golden Valley-based restaurant chain with over 1,200 locations globally responded to criticism by Marcato Capital Management and its principal Mick McGuire, calling its ongoing proxy war with them “unnecessary” and saying the investment firm had “no credible plan” to support the company’s long-term growth.
“Marcato appears primarily focused on having us sell 80 percent of our company-owned restaurants to franchisees,” Buffalo Wild Wings said in a proxy filing sent to shareholders. “[We] believe Marcato’s analysis is based on a lack of understanding of our business and unrealistic assumptions.”
The company stood behind its current model, which is made up of about half company-owned and half franchised. But to appease any concerns, Buffalo Wild Wings said it had hired on an outside financial advisor to review the plan, despite its belief that it “simply does not pencil out.”
McGuire, who holds 6 percent of the company’s shares, attacked the company’s board and management team, calling for the resignation of C-suite members, including CEO Sally Smith, as well requesting a seat on the board. Buffalo Wild Wings rebuffed the idea of seating McGuire, pointing to his past experience at Borders Group, where the company’s share price dropped 77 percent and the bookstore chain’s bankruptcy while he served as chairman.
Instead, Buffalo Wild Wings urged shareholders to vote for its nine directors during its annual shareholder meeting in June. It cited key industry metrics — same-store sales, restaurant level margins, returns on capital investments and earnings per share growth — which it claims outperforms its peers. For instance, a $10 investment in the company in 2003 today would be worth about $175 today.
“If you invested with us at our IPO [in 2003], 10 years ago, five years ago, three years ago or even just a year ago, you have earned a return that exceeds the median return generated by other casual dining restaurant companies,” Buffalo Wild Wings said. “And we are not sitting still.”
Shares of the company rose nearly 1.5 percent on Monday over its Friday close of $161.75.
At the June shareholder meeting, Buffalo Wild Wings is seeking approval to add Janice Fields to its board. Fields, who was chosen by Forbes magazine in 2012 as one of the most powerful women in business, served for years as the president of McDonald’s.
Buffalo Wild Wings is also seeking the approval for Sam Rovit, the CEO of CTI Foods, to join its board. Notably, Rovit was first nominated by Marcato.
“Some of Marcato’s ideas had merit (many of which we had been considering ourselves) and were welcomed,” Buffalo Wild Wings said. “We have implemented or are implementing them. In our view, the remainder of Marcato’s suggestions, however, would add substantial risk to our business, with no identifiable, long-term benefit.”