The disgruntled investor looking to buy Red Robin Gourmet Burgers may have a new ally. A second shareholder, this one holding a 6.7% stake, has filed security documents blasting the chain’s new management for failing to craft a new turnaround plan after rejecting a $40-per-share takeover bid in early September.
That second stockholder, Boston-based Viex Capital Advisors, said in a securities filing that it intends to continue amassing shares and will ask Red Robin’s newly reconstituted board to suspend a poison pill provision that would be triggered if Viex’s stake reaches 10%.
Viex said it may seek to maximize the value of its investment by suggesting a change in Red Robin’s direction, capitalization and board of directors. The board has just been reconstituted through the appointment of industry veterans G.J. Hart, the CEO of Torchy’s Tacos; Tom Conforti, a one-time CFO of Applebee’s parent Dine Brands Global; and David Pace, formerly the CEO of Jamba, who serves as chairman.
A seat will also be taken by Paul Murphy, whom Red Robin brought aboard in October as CEO. On the same day his appointment was announced, the casual chain rejected a $40-a-share purchase offer from Vintage Capital, a shareholder holding a 11.7% stake.
Viex noted the offer in its Securities and Exchange Commission filing, saying Red Robin has yet to air a new strategic plan after rejecting that change in ownership. It stated that it may reach out to other shareholders in its efforts to maximize Red Robin’s investment value.
The firm said it has already conferred with Red Robin’s management about its disappointment in their leadership and indicated that it may seek more consultation with the board and executive team.
“Red Robin welcomes open communications with its shareholders and values input toward the shared goal of enhancing value," the chain said in a statement provided to Restaurant Business. "While we do not comment on discussions with specific shareholders, the Company looks forward to continuing our dialogue with VIEX and our other shareholders.”
Murphy has indicated that he intends to follow the turnaround plan that was aired by Pattye Moore, who served as CEO on an interim basis prior to Murphy’s appointment. But Red Robin immediately halted a refranchising program, an initiative pursued by Moore, after Murphy came aboard from Noodles & Co.
Vintage tore into Red Robin for rejecting its takeover offer and not consulting with the shareholder, one of its largest, before hiring Murphy. It faulted Red Robin’s board in particular for the compensation package it awarded Murphy, asserting that he stands to collect $9 million in cash and stock if Red Robin should be acquired.
Viex’s filing is the latest development in a year of change for Red Robin. The chain has been struggling to right itself after a plan to cut two restaurant-level staff positions left tables un-bussed and dramatically increased customers’ wait times to be seated. Its respected CEO, Denny Post, announced her abrupt retirement in April.
The chain has been striving to recapture customers and bolster sales through unit-level retraining and pushing for more off-premise business. It has also lessened its reliance on an everyday menu of bargain-priced burgers.
Red Robin has yet to publicly respond to Viex’s filing.