Marcato Sends Letter to Buffalo Wild Wings Board of Directors
October 13 2016 - 4:18PM
Business Wire
Marcato Capital Management LP (“Marcato”), a San Francisco-based
investment manager which manages funds that beneficially own
approximately 5.2% of the outstanding common shares of Buffalo Wild
Wings, Inc. (NASDAQ:BWLD) (“Buffalo Wild Wings” or the “Company”)
today sent a letter to the Company’s Board of Directors in response
to management’s inability to provide Marcato with shareholder
information in a timely manner per Minnesota state law.
Mick McGuire, Founder and Managing Partner of Marcato, said: “We
are troubled by Buffalo Wild Wings’ actions that have
disenfranchised shareholders, entrenched management, and thwarted
our ability and legal right to communicate with other shareholders.
The Company’s refusal to provide us with readily available basic
shareholder information, coupled with the recent appointment of
three new Board members unilaterally and without shareholder input,
has exacerbated our concerns that shareholders’ interests are not
being served.”
The full letter is below.
October 13, 2016Board of DirectorsBuffalo Wild Wings, Inc.5500
Wayzata Boulevard, Suite 1600Minneapolis, MN 55416Attn: Sally
Smith
Dear Members of the Board:
As you know, on August 22nd Marcato submitted a standard and
routine request for shareholder list materials so that we may
communicate with our fellow shareholders of Buffalo Wild Wings,
Inc. (the “Company or “BWW”). Unfortunately, the Company has still
not complied with its obligations under Minnesota law, as the vast
majority of the requested information – and virtually all useful
requested information – remains outstanding. We are hopeful that
management will agree to provide the remaining information promptly
and without any further waste of Company resources.
We are troubled by the lengths to which management has gone in
an apparent attempt to thwart our communications with other
shareholders and have no doubt that our fellow shareholders will
find management’s behavior as disconcerting as we do. We were
further troubled to hear of your decision on October 6th to appoint
three new directors to the Company’s board, a decision made
unilaterally and without consultation with the Company’s
shareholders. These new appointments were clearly intended to
create the false impression of meaningful change, but without
actual engagement in constructive dialogue with shareholders. These
actions are an unfortunate continuation of the Company’s pattern of
entrenchment, obfuscation and poor decision making. Accordingly, we
are writing this letter to alert you and our fellow shareholders of
the Company’s obstructionist behavior in the hope that you will
instruct management to immediately put an end to it.
It has now been more than seven weeks since Marcato—a 5.2%
stakeholder in BWW—requested a limited amount of information for
the purpose of communicating with fellow shareholders. As I’m sure
you know, Marcato has an unassailable right under Minn. Stat. §
302A.461 to receive this information. Other public companies
routinely provide such information to shareholders without question
or delay when presented with similar requests. This is in fact the
very same information that BWW is already using itself—we are
merely seeking to have a “level playing field” with the Company. It
should not take nearly two months to produce.
The Company initially refused to acknowledge that Marcato owned
any BWW shares. Specifically, Company
counsel stated that the Schedule 13D which we filed with the U.S.
Securities and Exchange Commission on August 17, 2016, a copy of
which was enclosed with our request, was “insufficient to
demonstrate that any particular entity was a shareholder of BWW as
of [August 22, 2016].” Company counsel insisted that we provide a
brokerage account statement evidencing Marcato’s ownership. When
asked to explain, our attorneys were told by your counsel that
Marcato “could have sold all of its shares” since the 13D filing.
To put it another way: management appears to have envisioned a
scenario in which Marcato submitted a shareholder list request
after it sold all of its BWW holdings,
without disclosing the sale in a subsequent 13D amendment. It’s a
scenario that defies logic. Company counsel then conditioned
providing any information on Marcato entering into an onerous
confidentiality agreement that went well beyond what was required
by law. Surely, management must have understood that providing a
draft agreement with such terms served no purpose other than to
further delay our communications with other shareholders.
Nevertheless, we reached out in good faith with a draft
confidentiality agreement reflecting an accommodating approach. We
also provided the account statement, as requested. In return,
Company counsel asserted that Marcato Capital Management LP
(“Marcato Capital”) was not a proper
party to the shareholder list request “[g]iven that the applicable
statute requires the shareholder to own stock as of the dated [sic]
of a demand.” We were surprised by this response, given that Minn.
Stat. § 302A.461 explicitly states that a “beneficial owner” has an
“absolute right” to demand shareholder list materials and that
Marcato Capital was clearly a beneficial owner. Your counsel then
demanded that Marcato Capital provide copies of its confidential
investment advisory agreements to prove that it was a beneficial
owner of common stock.
After multiple rounds of back and forth with counsel, management
backed off its unsupported demands and conceded that we were
shareholders and entitled to receive materials. We were optimistic
we were putting this episode behind us. Unfortunately, when the
materials we were promised finally arrived by email, the
information we were given was incomplete, outdated and virtually
useless. These materials included:
- Transfer agent-level shareholder lists
of the holders of record of the Company’s common stock dated as of
September 13, 2016 and March 17, 2016. These lists did not provide
any information regarding the identities or holdings of the actual
beneficial owners of the common shares – information necessary to
communicate with them and which is not only customarily provided
but legally required to be provided; and
- A list of holders of Company shares
held through employee benefit plans, dated March 14, 2016. This
list is over six-months old and only provides information with
respect to approximately 1% of the Company’s outstanding
shares.
In other words, management chose to disclose only the holders known to the Company’s transfer
agent. You undoubtedly are aware that, as with every other public
company, virtually all BWW shareholders hold their shares in
“street name” through accounts with banks, brokers and other
financial intermediaries. The distinction between the two is
critical and widely understood. The information we were provided
contains no relevant or useful information about the actual
shareholder base. That the Company would respond to our request in
such a perfunctory manner is deeply disappointing.
It is clear that, in providing this information, management’s
intent was to inhibit or delay our communications with other
shareholders. In this regard, it does not appear to be a mere
coincidence that the information that management is refusing to
provide us is also that which would facilitate such communications.
In particular, the Company’s response included neither a list of
Non Objecting Beneficial Owners (“NOBO”) nor any information obtained from the
Depository Trust Company (“DTC”). This
is information that is easy to generate on a rolling basis as we
have requested. It’s not much harder than pushing a button. And
doing so would cost the Company nothing as we have committed to
cover the expense.
If management’s true intent was to allow Marcato to communicate
with other BWW shareholders, it would have provided all of the information requested in our August
22nd letter, including:
- Contact information that was omitted in
the Company’s response (e.g., telephone numbers) with respect to
each record holder and employee plan (a “Plan”) participant;
- Dates on which each record holder
became a holder of record of shares;
- Name, business address and telephone
number of the Plan’s trustee or administrator;
- Detailed explanation of the voting
treatment of (A) shares of Company stock (“Stock”) for which a trustee or administrator
receives instructions from Plan participants and (B) shares of
Stock for which either the trustee or administrator does not
receive instructions or shares of Stock which are outstanding in
any such Plan but are unallocated to any participant;
- Complete record or list of the holders
of Stock and respondent banks (and their email addresses) who have
elected to receive electronic copies of proxy materials with
respect to meetings of stockholders of the Company pursuant to Rule
14a-16(j)(2) of the Securities Exchange Act of 1934 (the
“Exchange Act”);
- All information in possession or
control of the Company or any of its transfer agents, registrars or
proxy solicitors, or which can reasonably be obtained from DTC,
brokers, dealers, banks, clearing agencies, voting trustees or
their respective nominee, concerning the names, addresses,
telephone numbers and number of shares of Stock held by the
participating brokers and banks named in the individual nominee
names of Cede & Co., specifically with respect to Cede &
Co., the daily DTC Security Position Reports, or other similar
depositories or nominees, including respondent bank lists, all
omnibus proxies and related respondent bank proxies and listings
issued pursuant to Rule 14b-2 under the Exchange Act;
- All information in or that comes into
the Company’s or its transfer agents’, registrars’ or proxy
solicitors’ possession or control, or that can reasonably be
obtained from brokers, dealers, banks, clearing agencies, voting
trustees or their respective nominee (including Broadridge
Financial Services and Mediant Communications), relating to the
names, addresses, and number of shares of the beneficial owners of
Stock pursuant to Rule 14b-1(c) or Rule 14b-2(c) under the Exchange
Act, including a NOBO list; and
- Updates to all of the information
described above on a rolling basis going forward.
These materials should be provided to us promptly. We have no
desire to engage in litigation as a means to resolve the issues
outlined in this letter. However, we are quickly approaching a
point where management’s obstinate resistance will leave us with no
other choice, and your recent actions have only exacerbated our
concerns that shareholders’ interests are not being served by the
board as currently composed. Accordingly, we reserve all rights and
remedies.
We look forward to hearing from you.
Sincerely,
Mick McGuire
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