Last week, Vintage Capital Management offered to acquire Red Robin for $40 per share, representing a 57% premium to the company's prior share price. Red Robin was apparently not receptive to the bid. And this week, Vintage founder Brian Kahn sent a letter to Red Robin's board calling for a shareholder meeting, where he plans to propose a new slate of directors that would be more amenable to a possible sale.
In the letter, Kahn wrote that Red Robin has neither announced a formal process to explore a deal with Vintage nor reached out to the firm to discuss the proposal. Vintage owns more than 11.5% of Red Robin, a Colorado-based business with a market cap of just over $400 million. In an SEC filing, Red Robin said it would review Vintage's request for a special meeting and defended its current board members as "established industry leaders."
Vintage is a Florida-based firm that invests primarily in the consumer, aerospace, defense and manufacturing sectors, with a portfolio that includes the Papa Murphy's pizza chain and Buddy's Home Furnishings, a rent-to-own company operating in the US. In recent months, the firm's pursuit of a very similar business concluded with one of the stranger turns of events in recent private equity history.
That business was Rent-A-Center, another rent-to-own company that Vintage agreed to acquire last June for $15 per share, equating to an enterprise value of about $1.37 billion. The agreement, struck on June 17, came with a six-month deadline; before those six months were up, both Vintage and Rent-A-Center had the option to extend the deadline another three months. All they had to do was give written notice to the other party of their desire to do so.
Those six months came and went. The very next day, on December 18, Rent-A-Center announced that it had terminated the deal with Vintage after not receiving notice of an extension and noted that Vintage now owed the company a $126.5 million breakup fee. Vintage promptly responded with a press release saying the "purported termination" was "invalid." B. Riley Financial, which had been a co-investor alongside Vintage in the deal, voiced its agreement. And before long, the issue had moved to the courts.
A few months later, in March 2019, a Delaware court sided with Rent-A-Center, saying the company was fully within its rights to call off the merger. The ruling from Vice Chancellor Sam Glasscock III is worth quoting in full:
"Vintage's arguments are after-the-fact rationalizations as to why failure to give written notice of election to extend is excused. I am left to the startling conclusion that, having vigorously negotiated a provision under which Vintage was entitled to extend the End Date simply by sending Rent-A-Center notice of election to do so by a date certain, Vintage and B. Riley personnel, in the context of this $1 billion-plus merger, simply forgot to give such notice."
But now, Vintage has moved on from home furnishings to hamburgers. The firm surely hopes its demand for a new board at Red Robin is more effective than its recent calendar management.
Featured image via LauriPatterson/iStock/Getty Images Plus
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