Buffalo Wild Wings: ‘Our board and management team are under attack’

Buffalo Wild Wings

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The battle between Buffalo Wild Wings and Marcato Capital Management continued on Monday after the chicken wing company wrote a letter to shareholders accusing the hedge fund of attacking its board and management team.

“After generating industry-leading total shareholder returns for our shareholders since our IPO in 2003 — indeed, $10,000 invested in our stock at the IPO was worth more than $175,000 on March 31, 2017 — our Board and management team are under attack from a short-term-focused hedge fund, Marcato Capital Management, that seeks to upend our winning formula and business strategy,” the company said.

Marcato, which owns 6.1 percent of the restaurant chain’s outstanding stock, has been pushing since July for Buffalo Wild Wings to franchise more of its restaurants and last week called for B-Dubs CEO Sally Smith to resign. Buffalo Wild Wings defended Smith’s performance, saying she has helped generate huge returns for shareholders.

“We believe that Marcato’s plans for the business — involving a massiverefranchising of our company-owned stores, among other things — will not create sustainable shareholder value but will create substantial risk,” Buffalo Wild Wings said.

The chicken wing chain asked shareholders to vote for its proposed board of directors ahead of the company’s annual shareholders meeting on June 2.

Marcato is hoping to convince shareholders to add more of its proposed nominees to the board, instead.

In February, the hedge fund nominated its founder Mick McGuire and three others directors to the board. However, in late March, Buffalo Wild Wings picked only one of Marcato’s suggestions — Sam Rovit, who has 20 years of experience in the food service industry, for its slate.

The gesture was not enough for Marcato. The firm said last month that B-Dubs did “not go far enough” and had not addressed the firm’s proposed operational improvements and business model modifications, which it says will drive value for shareholders.

Marcato in March also published a presentation for investors that argued the executives’ interests were not closely aligned with the chain’s shareholders. McGuire noted that none of the Buffalo Wild Wings executives owns the company’s stock and only one director has ever executed an open-market purchase of the stock.

He also argued that B-Dubs’ management team has been using equity incentive plans to purchase shares at a lower price and then sell them on the market to make cash.

“Our record of outstanding performance is compelling. If you invested with us at our IPO, ten 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 Monday.

Shares of the company were up about a half of a percent in trading, last changing hands at $162.45.

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