Buffalo Wild Wings says activist invest Marcato "has no credible plan."

MINNEAPOLIS – The war of words between Buffalo Wild Wings Inc. and shareholder Marcato Capital Management LP continued as the company told shareholders in a letter that the Buffalo Wild Wings board and management team “…are under attack from a short-term-focused hedge fund…”

“We have made considerable efforts to resolve this unnecessary proxy contest, but Marcato has rejected every one of our proposals,” the company said in a statement. “We believe that Marcato’s plans for the business — involving a massive refranchising of our company-owned stores, among other things — will not create sustainable shareholder value but will create substantial risk.”

In a securities filing last week Marcato, which owns a 6.1 percent interest in Buffalo Wild Wings, said CEO Sally Smith should resign. The hedge fund also released a presentation explaining areas where Smith and other Buffalo Wild Wings executives have failed to address critical business matters such as share price, guest experience and capital deployment among other issues.

But Buffalo Wild Wings pushed back and defended Smith, arguing that $10,000 invested in the company’s stock in 2003 at the IPO was worth more than $175,000 on March 31, 2017. “The company has continued to innovate and pursue cost savings initiatives amid difficult market conditions for the sector and remains focused on creating sustainable value for our shareholders,” the company said in a statement.

Buffalo Wild Wings will hold an annual meeting of shareholders on June 2, and shareholders will be voting for nominees to the company’s board of directors. Four members of the board are up for re-election and Buffalo Wild Wings urged shareholders to re-elect all of them, including Sally Smith.

The company also selected one of Marcato’s nominees — Sam Rovit, CEO of CTI Foods — for its slate of board candidates. But Marcato said that the nomination didn’t go far enough to correct problems at the company. Buffalo Wild Wings described Marcato’s strategy of removing three independent directors who have served for more than a year as an aggressive move that would leave the company without “highly valuable and critical institutional knowledge and expertise.”

“Marcato has proposed that, in their stead, you should elect a hedge fund manager who has never created value for shareholders while serving on public company boards; a former Buffalo Wild Wings employee who left the company by mutual agreement and vastly exaggerates his achievements at Buffalo Wild Wings; and a former restaurant executive who refused even to meet with, or be interviewed by, the chairman of our board during our board nominee vetting process,” the company said. “Why would you do that?”