Dive Brief:
- In a nod to activist investor Gamco Asset Management, which has raised questions about transparency and the company's stock distribution, Ingles Markets agreed this week to support one of the two candidates nominated by the shareholder for a board seat, reported Winsight Grocery Business.
- The grocer supports the nomination of John "Jack" Lowden, president and CEO of private equity firm Newcastle Partners, whom Gamco had put forward along with one other nominee late last year.
- However, in a proxy statement Ingles indicated it will vote against a related proposal to limit the “supersize” voting rights of private stock holders. Ingles' shares are divided into Class A, which are publicly traded, and Class B, which are not. Chairman Robert Ingle and his family control 76% of the company's voting power and 28% of company stock. Ingles allows Class A shareholders to elect two board members each year.
Dive Insight:
Family controlled businesses are a slightly different breed when it comes to publicly offered stock, but some investors who are beginning to question the arrangement. In the case of Ingles, activist investor Gamco threatened a proxy fight and earned a concession from the grocer, but not quite as much as the firm was looking for.
Ingles is doing well and has a strong regional position in its markets, said Mickey Chadha, an analyst with Moody’s Investors Service, as quoted by Supermarket News. The retailer operates 200 stores in six southeastern states, many in rural and suburban communities where it maintains a healthy niche, withstanding challenges by Walmart and others. As a result, Gamco has no problem with the company’s operations, but wanted changes in oversight, and investor and analyst relations.
Gamco may have a case. Since it became public in 1987, Ingles has had two classes of stock, Winsight Grocery Business has noted. Class A shareholders get higher dividends in exchange for lower voting power, while Class B stock get the lion's share of voting power and is controlled by the Ingles family and the company's management team.
Besides its transparency issues, Ingles has not held live earnings calls in recent quarters. Gamco wanted two of its nominees elected to the board. It got one: John R. “Jack” Lowden, president and chief investment officer of NewCastle Partners. Apparently, the dispute is resolved, at least for now.
“Right now everyone is on the same wagon, and going in the same direction,” Mario Gabelli, Gamco’s founder, told Supermarket News. He hinted that changes may be coming, but was not specific, noting that “common sense prevailed.”
Gabelli said he supports of the company’s direction and management, but said, “we were a little frustrated that our analysts were not able to get fundamental information that all companies are willing to share.”
In its filing last year, Gamco said only three of the eight board members are independent, and indicated concern over shareholders not having a say in the ratification of company’s auditor, Supermarket News reported. Ron Freeman, the company’s chief financial officer, is also a director. All eight directors are up for election at the April 24 annual meeting. Two will be elected by Class A shareholders, and six by Class B shareholders. Lowden will be one of the two approved by Class A investors.
Although its contentions are focused on issues of transparency and company dynamics rather than strictly performance, Gamco joins a lineup of activist investors pressuring food companies. Supervalu entered a proxy fight with Blackwells Capital recently, while on the manufacturing side, Nestle and Hain Celestial have been feeling the heat from investors. In many cases, these investors are getting results — Jana Partners pressuring Whole Foods to sell then cashing out for $300 million being the most notable example — indicating the pressure may continue to build and spread as industry competition heats up in the coming years.