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Bidder for Red Robin gives the board an ultimatum

Vintage Capital said it will call a special meeting of shareholders unless the board acts within 10 days.
Photograph: Shutterstock

The investor pushing for a sale of Red Robin Gourmet Burgers has intensified the pressure by giving the chain’s board of directors an ultimatum: Announce a “robust strategic review” by June 29 or we’ll convene a meeting of shareholders to have a majority of you bounced.

Vintage Capital, which holds about 11.5% of Red Robin’s outstanding shares, alerted the company and the U.S. Securities and Exchange Commission this morning that it plans to convene a special meeting of shareholders. Simultaneously, according to the securities filing, a letter was sent to the company’s board, expressing frustration with the response to Vintage’s offer on June 13 to buy the 88% of shares it doesn’t own for $40 each, or about $461.4 million.  

The board said at the time that it would consider “any bona fide offer made by Vintage,” but that it would stick with its previously disclosed turnaround plan rather than commence an auction of the company or a review of its strategic direction.

Vintage said in its letter this morning, “We are dismayed that the board has not announced a formal process to explore strategic alternatives nor has the board or its advisors reached out to us to discuss our proposal.” It stressed that it’s ready to enlist other shareholders in its quest to change the brand’s direction, starting with an election to replace five of Red Robin's seven directors with candidates chosen by Vintage. 

Neither the targeted directors nor their possible replacements were named by the investor. 

Vintage said it would halt its plans for a special shareholders’ meeting if the board committed to a strategic review by June 29. It noted a desire to be part of that brainstorming, but agreed to hold off on other actions for 90 days if Red Robin’s board cooperated.

Red Robin responded in a securities filing that its board would "carefully review" Vintage's proposal for a special shareholder holding "and respond in due course." It also described its current directors as "established industry leaders with deep operational, financial, leadership and marketing expertise." 

The board includes Pattye Moore, acting CEO and a former president of Sonic Corp.; Alywin Lewis, the former CEO of Potbelly Sandwich Shop; Stuart Oran, a former director of Wendy's; and Steve Lumpkin, a former CEO and director of Applebee's. 

Earlier this month, Red Robin adopted a so-called poison pill defense against a possible stock buyout. 

The company is searching for a CEO to fill the vacancy left by the April retirement of Denny Post. It is also striving to win back dine-in traffic through a number of operational and marketing changes while simultaneously trying to build its off-premise business.

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