Marcato Capital Won’t Be Happy With What This Restaurant Chain Did On Tuesday

Marcato Capital Won’t Be Happy With What This Restaurant Chain Did On Tuesday


Buffalo Wild Wings (NASDAQ: BWLD), a casual-fast food restaurant that specializes in chicken wings, beers and broadcasting sporting events, announced on Tuesday it has appointed three new independent directors to its Board of Directors.

Normally a company adding new members to its board isn’t particularly newsworthy.  In Buffalo Wild Wings’ case it is.

Back in April, Marcato Capital Management, an activist investment firm, disclosed it owns 5.2 percent of the restaurant chain.  The firm made its position clear that the restaurant chain and its shareholders would benefit from a substantial change in the composition of its board.

Marcato also questioned the expertise of current board members and offered its senior executives to serve on the board to “ensure the proper implementation of best practices in areas such as capital allocation, management incentive compensation, and succession planning.”

Marcato also stated, “ it would be inappropriate for the existing Board to select any new directors outside of an annual meeting cycle without considerable consultation with its major shareholders, including Marcato.

This brings us back to Buffalo Wild Wings’ announcement on Tuesday in which it confirmed three new independent directors have been added.

Andre Fernandez, president of CBS Radio, Hal Lawston, senior vice president of North America at eBay, and Harmit Singh, chief financial officer of Levi Strauss, will all join Buffalo Wild Wings’ board effective immediately.

Buffalo Wild Wings has essentially proceeded against the wishes of a major shareholder.  Granted, the company has no legal obligation to listen to Marcato but it may be in their best interest not to irk an activist investor.

Marcato is a believer in the company and believes that with proper changes, shares could triple in value over the next four years alone.

Marcato has also done its homework and released an in-depth presentation relating to its concerns of the company’s business practices.  For instance, the company itself said it is targeting a 15 percent earnings per share growth profile but didn’t provide any specifics.

Marcato observed that there is time period for this objective.  There is also no details on how much of the growth will stem from organic initiatives, including same-store sales growth and expense savings.

Buffalo Wild Wings’ stock closed at $138.61 on Tuesday, up 0.45 percent on the day.  The stock has also lost more than 13 percent since the start of 2016 and nearly 30 percent over the past year.

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