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Engaged wants Del Frisco’s to dine out
Posted on Thursday, 06 December 2018 14:26
Engaged Capital has publicly published a letter that was sent to the board of directors of Del Frisco’s Restaurant urging the chain to look into strategic review just a day after the steakhouse adopted a so-called poison pill.

The activist hedge fund said it has built up a near-10.0 per cent stake as it believes in the dining outlet and its attractive assets, despite the fact it is “currently trading well below” its intrinsic value.

It noted there are “numerous parties interested in acquiring the company’s concepts at valuations that would deliver a significant premium to the current share price” and be very attractive to shareholders.

As such, Engaged is pushing for the board to correct “recent strategic missteps” to appoint representatives of these investors to the board and hire advisors.

The hedge fund wants a strategic review to oversee and manage a process to evaluate alternatives for the Double Eagle, Barcelona Wine Bar and bartaco brand owner to take advantage of the current active restaurant mergers and acquisitions (M&A) environment.

Zephyr, the M&A database published by Bureau van Dijk, shows a total of 28 takeovers have been announced in 2018 to date that target US food services and drinking places.

Interestingly, one of these featured Focus Brands buying Jamba in a deal that provided an exit for Engaged Capital, among other shareholders.

The activist investor noted: “Numerous large, well-capitalised private equity firms and strategic acquirers have been acquiring restaurant concepts at high valuation multiples [. . .] Simply put, we believe it is a seller’s market.”

Engaged Capital’s publicly-published letter to the board comes a day after Del Frisco’s announced it has adopted a shareholder rights plan after observing “unusual and substantial activity” in its shares.

The company has 71 locations across 16 states and Washington, District of Columbia, which operate under the brands Del Frisco’s Double Eagle Steakhouse, Barcelona Wine Bar, bartaco, and Del Frisco’s Grille.

© Zephus Ltd