UPDATE: April 21, 2020: Ancora Advisors advisory board member Carl Grassi has taken a seat on J. Alexander's board as part of a cooperative agreement with the investor, according to a press release. The decision brings the restaurant's board to seven members. Grassi will also be included in the company's slate of director nominees for its 2020 Annual Meeting for a three-year term. He is a member at the business advisory and advocacy law firm McDonald's Hopkins where he also serves on the board and is corporate council for various middle-market and growth companies. “We believe [Grassi's] insight will be an asset as we move forward with the company’s previously announced review of strategic alternatives, which we plan to continue once the COVID-19-related uncertainties in the business community, the restaurant industry and the financial markets are resolved and the company’s performance has returned to levels which will support an attractive valuation," Lonnie Stout II, executive chairman at J. Alexander's, said in the press release.
UPDATE: April 12, 2019: J. Alexander's board of directors rejected Ancora's proposal in a letter saying that the investor is trying to acquire control of the company at a bargain price. The board called the offer "unattractive to entertain" and that considering it would be inconsistent with the company's fiduciary duties to its shareholders.
Dive Brief:
- Activist investor Ancora Advisors has launched a takeover bid for contemporary wood-fired cuisine restaurant J. Alexander's, according to CNBC.
- With 1.3 million shares already in Ancora's pocket, it offered to buy the Nashville chain for $186 million.
- Ancora believes J. Alexander's wound up in distress after returning to public markets in September 2015. The activist investor also claims that when it agreed to a spinoff deal with Fidelity National Financial, which included the hiring of a management consulting firm, this led to reduced value for shareholders. The investor is also critical of August 2017 efforts to merge with Fidelity National Financials' Ninety Nine Restaurants due to several conflicts of interest with board members being on both sides of transaction.
Dive Insight:
This agreement is a far cry from the heated back-and-forth between Ancora and J. Alexander's last year, when the activist investor pushed for a takeover of the dining chain.
It seems that activist investor pressure may be waning in the casual space overall, with Red Robin recently reaching an agreement with Vintage Capital and Kahn Capital Management by appointing Anthony Ackil as an independent director. The Vintage Parties will also be able to acquire up to 20% of Red Robin's common stock without being deemed an acquiring person. Bloomin' Brands also recently ended its dispute with Jana Partners by agreeing to appoint two independent directors to its board.
It's unclear why tensions are cooling among activist in the full-service dining space, but it's likely a welcome relief for chains battling to stay afloat amid the novel coronavirus crisis.
And while activist investors may launch heavy criticisms at restaurant groups over their alleged mismanagement of casual chains like J. Alexander's, these agents of change aren't inherently bad. The restaurant space is more competitive than ever with new trends like food delivery, e-commerce, home-delivered meal kits and rapidly changing consumer preferences making it harder and harder to bring home meaningful margins.
These entities have been putting serious pressure on the casual dining space. There are plenty of success stories, too, like hedge fund Starboard Value's takeover of Darden Restaurants around 2014, which led to a 29% boost in the company's stock price, cutting about $100 million costs from operations and remodeling its restaurants to achieve a more modern look. Last month, Cracker Barrel's biggest shareholder, Saradar Biglari, fired a shot at CEO Sandra B. Cochran, asking her to sell its Holler and Dash Biscuit House fast casual concept and arguing that the banner was an "ill-conceived project destined to fail."
In December pressure from activist investor Engaged Capital, which has snagged about 10% of Del Frisco's Restaurant Group shares, led to the company to consider a sale and other strategies to increase shareholder value.
With $6.5 billion in assets under management, Ancora is in the business of targeting undervalued companies and agitating for change with the hopes of shaking out shareholder value. They've employed tactics like replacing management and board members as well as spinoffs and proposed mergers in the past.
