HOUSTON -- The Pantry Inc.'s NASDAQ-listed stock is "deeply undervalued as a result of poor investment and operational decisions that have destroyed shareholder value," according to a statement released today by Concerned Pantry Shareholders (CPS), a group led by Houston investment groups JCP Investment Management LLC and Lone Star Value Management LLC. Combined, CPS owns 1.9 percent of The Pantry's outstanding shares.
As a way to lift the stock price of the parent of Kangaroo Express, CPS has proposed the election of three independent board of director candidates. CPS' proposed nominees are:
- Todd E. Diener, former executive officer of Brink's International Inc., where he served as president of Chili's Grill & Bar and On the Border restaurants;
- James C. Papas, managing member of JCP Investment Management. He is chairman of the board of the compensation and leadership committee of Morgan's Foods, a public company that operates wholly owned KFC, Taco Bell and Pizza Hut restaurants; and
- Joshua A. Schechter, director of Adrenas Co. Ltd., a multi-national company engaged in hair-related businesses.
"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 complementary skill sets," the group stated in a news release.
CPS added that the current board has presided over a "prolonged underperformance," noting "Pantry has had four CEOs in the past five years and continues to lack a strategically coherent plan to stop the value destruction."
As evidence, CPS presented one-, three- and five-year stock market returns for The Pantry compared to c-store industry peers Susser Holdings Corp., Alimentation Couche-Tard Inc. and Casey's General Stores Inc. On a five-year basis, The Pantry's stock has declined by 17 percent, compared to a 342-percent gain for Susser, a 449-percent gain for Couche-Tard and a 223-percent gain for Casey's.
Cary, N.C.-based The Pantry issued a response, stating that it always acts in the best interests of the company and its shareholders.
"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," The Pantry said in a news release.
The operator of 1,537 Kangaroo Express locations added that it implemented a new leadership team in March 2012 "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." Current President and CEO Dennis G. Hatchell was among these 2012 changes.
CPS plans to convince The Pantry's shareholders to vote for its board of director nominees during the company's 2014 annual meeting, scheduled for March 13. The Pantry is certain to address CPS' claims further in its 2013 fourth-quarter earnings call on Jan. 28.
This is not the first time an investor group has targeted a c-store related company for alleged underperformance. Last year, Elliott Management Corp. battled Hess Corp. in a proxy fight, which later led to the announcement that Hess would spin off or sell its entire retail division.