The Pantry Under Siege
Retailer says "dissident" director nominees don't possess experience, expertise required
Published in CSP Daily News
CARY, N.C. -- Reaffirming the confidence it has placed in new leadership installed in early 2012 and the strategy it is pursuing, officials at The Pantry are holding their ground in an attempt by two major investors to install a new board of directors to the public company.
Concerned Pantry Shareholders (CPS), a group led by JCP Investment Management LLC and Lone Star Value Management LLC, together a significant shareholder of The Pantry with aggregate ownership of approximately 1.9% of its outstanding shares, announced its intention to seek the election of what it says are three independent, highly qualified director candidates to the board.
CPS is a group "dedicated to maximizing shareholder value and improving corporate governance at Pantry," it said.
As reported in a 21st Century Smoke/CSP Daily News Flash, after discussions between The Pantry management and selected directors and CPS, the company's Corporate Governance & Nominating Committee reviewed several individuals put forward by CPS and determined that they should not be nominated by The Pantry to serve on the company's board.
The Pantry issued the following statement:
"The Pantry's board of directors and management team are committed to acting in the best interests of the company and all stockholders. We seek to maintain an open dialogue with stockholders and have spoken with representatives of the dissident group on several occasions to understand their thoughts. After carefully evaluating several individuals put forward by the dissident group, we have determined that they do not possess the particular experience and expertise that the company is seeking in director candidates at this time. Our board is currently composed of 10 highly qualified directors, nine of whom are independent, who together possess significant retail, convenience store, consumer packaged goods, foodservice and financial experience that is highly relevant and critical to our business."
In a press statement, CPS said:
"In our view, Pantry is deeply undervalued as a result of poor investment and operational decisions that have destroyed shareholder value. We believe substantial shareholder representation is needed on the board to ensure that appropriate actions are taken to drive better financial performance and create value for all shareholders. CPS believes any meaningful board improvement must include the addition of new, highly qualified and independent directors with relevant credentials and complimentary skill sets.
"The current board has presided over a prolonged underperformance. Pantry has had four CEOs in the past five years and continues to lack a strategically coherent plan to stop the value destruction. Pantry's total shareholder returns over the last one-, three-, five- and 10-year periods on an absolute basis and relative to its peers and the S&P 500 Index have been abysmal. The company has delivered negative returns to shareholders over many consecutive years."
The Pantry's statement continued:
"Beginning in March 2012, the board put in place a new leadership team that it believes possesses the skills and experience to improve the company's performance and unlock the potential of The Pantry's powerful convenience store platform. Since that time, the board and management team have been executing against the key pillars of The Pantry's strategy, which include:
- Increasing same-store sales by enhancing merchandise mix and effectiveness;
- Investing in technology to support fuel pricing optimization;
- Prudently managing expenses and reducing debt;
- Accelerating its store remodeling program, enhancing proprietary foodservice and adding quick-service restaurants in existing stores; and
- Utilizing new store opportunities and selective acquisitions to prioritize markets, further accelerate growth and build stockholder value.
"We are now taking advantage of the favorable operating environment and The Pantry's leading positions and scale in attractive markets to make progress on our strategic priorities. We believe that, with the expertise of an outstanding management team and the oversight of an engaged and knowledgeable board, The Pantry is well positioned to deliver sustained profitable growth. We are confident that the company is on the right path to achieve future success and optimize value creation for all stakeholders."
The Pantry's board will present its formal recommendation regarding director nominations in its proxy statement for its annual meeting of stockholders scheduled for March 13, 2014, which will be filed with the U.S. Securities & Exchange Commission (SEC).
Based in Cary, N.C., The Pantry is a leading independently operated convenience store chain in the southeastern United States and one of the largest independently operated convenience store chains in the country. As of Jan. 23, 2014, the company operated 1,537 stores in 13 states under select banners, including Kangaroo Express, its primary operating banner.