HOUSTON, June 1, 2017 /PRNewswire/ -- JCP Investment Management, LLC, together with its affiliates and the other participants in its solicitation (collectively, "JCP" or "we"), collectively one of the largest stockholders of Fiesta Restaurant Group, Inc. ("Fiesta" or the "Company") (NASDAQ: FRGI), with aggregate ownership of approximately 9.0% of the Company's outstanding shares, today commented on Glass, Lewis & Co., LLC's ("Glass Lewis") recommendation regarding the election of director candidates to Fiesta's Board of Directors (the "Board') at the Company's upcoming Annual Meeting to be held on June 7, 2017.
Given our commitment to good corporate governance, belief in our ability to unlock stockholder value, and our belief in what all shareholders want, we would immediately advocate to:
- Destagger the Board, and
- Have New Shareholder Representation
JCP is pleased that Glass Lewis acknowledged that Fiesta's "financial performance has been substandard and disappointing"1 and that "[s]uch financial underperformance could understandably lead some shareholders to rationalize that the Company's incumbent directors need to be held accountable and removed from the board." However, JCP is disappointed that Glass Lewis appears to have viewed the Board's logical responses to JCP's involvement as "proactive steps to address the relevant issues at hand."
We would highlight to stockholders and advisory firms that the following occurred only after JCP's public involvement:
- CEO was replaced. Given the 5-month gap without a permanent CEO, it is evident the Board was not prepared with a succession plan
- Notably, new CEO Rich Stockinger was not added to the Board upon his appointment as CEO. He was added after JCP questioned his lack of addition during settlement discussions
- 3 new directors with restaurant industry experience were added to the Board (including the CEO). However, no non-executive director has stepped down from the Board
- Fiesta's "Strategic Renewal Plan" was released
- The first purchase of Fiesta shares by an incumbent director was made
As such, we view the Board's response as reactions to our suggestions rather than evidence of proactive engagement. Glass Lewis seemingly agrees with JCP's assessment with regards to the poor shareholder returns and lack of restaurant industry experience prior to JCP's involvement:
- "Notably, the Company's TSR has materially trailed the median returns of the Industry Peer Group and the Russell 2000 Restaurant Index for each of the selected periods [since JCP's Schedule 13D filing, 1-year, 2-year, 3-year and since Fiesta's spin-off]. This suggests to us that the Company's TSR performance, on both an absolute and relative basis, has not only been adversely impacted by industry headwinds facing other fast casual restaurants, but also by company-specific issues that have resulted in the underperformance of the Company's shares."
- "Based on the biographical information presented in the Company's proxy statement, none of the six legacy independent directors appear to us to have any operational experience in the restaurant sector…which we believe is quite surprising for a restaurant firm such as FRGI."
- "In our view, the lack of restaurant operation experience at the board level might raise some concerns as to whether the Company's board had the appropriate background mix to be able to ask the right questions and truly hold management accountable as opposed to perhaps simply deferring to management."
While we agree with many of the steps taken subsequent to our involvement, we do not believe that retaining the current Board as structured adequately holds the Board accountable for the poor operating and price performance at Fiesta. If elected, our highly qualified nominees, John B. Morlock and James C. Pappas, eagerly look forward to working with new CEO Rich Stockinger and the other members of the Board to restore stockholder value. With our significant investment in the Company, we believe our interests are better aligned with public stockholders to bring proactive accountability to the Board. As we've stated in our presentation, we believe Fiesta is significantly undervalued relative to its potential.
FIESTA STOCKHOLDERS – VOTE TO RESTORE ACCOUNTABILITY AND THE VALUE OF YOUR INVESTMENT BY VOTING THE GOLD PROXY CARD TODAY
The time for accountability is now. We urge stockholders to send a clear message to the Board that Fiesta's continued underperformance and pattern of entrenchment will not be tolerated by voting the GOLD proxy to elect our highly qualified candidates John B. Morlock and James C. Pappas.
VOTE THE GOLD PROXY CARD TO ELECT JOHN B. MORLOCK AND JAMES C. PAPPAS TODAY
If you have any questions, or require assistance with your vote, please contact InvestorCom, toll-free at (877) 972-0090, call direct at (203) 972-9300
About JCP Investment Management:
JCP Investment Management, LLC is an investment firm headquartered in Houston, TX that engages in value-based investing across the capital structure. JCP follows an opportunistic approach to investing across different equity, credit and distressed securities largely in North America.
James C. Pappas
JCP Investment Management, LLC
John Glenn Grau
Bill Douglass, (646) 504-0890
1 Permission to quote from the Glass Lewis report was neither sought nor obtained. Emphases have been added by JCP.
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SOURCE JCP Investment Management, LLC