Buffalo Wild Wings CEO Sally Smith announced that she would retire by the end of 2017 after a bitter proxy contest had been won by an activist hedge fund that in turn placed three of its own directors on the board at the chicken-wing restaurant chain.
The decision by Smith to step aside from the CEO perch she has held over two decades after spending most of the last 12 months attempting to fend off the demands of Marcato Capital Management that have called for change, underscores how strongly the message of the activist investor has resonated with the rest of the company’s shareholders.
The official vote tally will not be announced for a couple of days, early indications have shown that close to two-third of the shareholders voted for the hedge fund’s board nominees, said someone close to the situation.
Smith, who since 1996 has been the company’s CEO, oversaw an increase of 10-fold in the stock at the company since it went public during 2003.
However, the company has struggled to reach its market value since its shares peaked at $201.14 during September of 2015.
A restaurant analyst said now is when new blood is needed. He added that the business needed menu prices to remain down and add more discipline with cost controls.
Marcato, which has a stake of 9% in the company, has seen a return on its flagship fund of 7.7% thus far in 2017, while its smaller fund Encore, is 16% higher, handily beating the 2.3% average for hedge funds for this year and the S&P 500 gain of 8.7%.
Buffalo Wings based in Minneapolis has a $2.6 billion market value. The campaign by Marcato became public in July of last year, when the hedge fund started pressuring Smith and board members to pursue new strategies that it said would boost the stock prices of the company that lagged in 2015 compared to its peers.
From the start, Marcato, which is operated by Mick McGuire, called for franchising 90% of its over 1,200 restaurants, up from its ratio currently of 50-50 and to increase its tech and international expansion.
In 2017, the pressure was stepped up by McGuire when he called for the CEO to be let go.
That fight turned increasingly personal and bitter but was won in the end by the activist during a time many of these funds have reached settlements with businesses.