Concerned Pantry Shareholders Pens Another Letter

HOUSTON -- The proxy battle between The Pantry Inc. and Concerned Pantry Shareholders (CPS) added another chapter this morning when the dissident group sent another letter to the convenience store operator's stockholders.

CPS, a group led by Houston-based JCP Investment Management LLC and Old Greenwich, Conn.-based Lone Star Value Management LLC, cumulatively owns 1.9 percent of The Pantry's stock. The main goal of the letter was to again ask shareholders to vote for its board of director nominees -- Todd E. Diener, James C. Papas and Joshua A. Schechter -- during The Pantry's annual meeting on March 13.

However, today's letter made specific allegations against The Pantry, the parent company of 1,538 Kangaroo Express stores. Chief among these was that the company's stock has declined by 36 percent over the past 10 years, and that this performance significantly trails the performances of Alimentation Couche-Tard Inc., Susser Holdings Corp. and Casey's General Stores Inc.

CPS said it is "dismayed" that the current members of the board of directors have been net sellers of The Pantry's stock since the beginning of 2010, meaning even they are allegedly not convinced the company's stock can rise. According to CPS, board members have sold 22,096 shares since the beginning of 2010, while only purchasing 2,535 shares.

The dissident group specifically took aim at one facet of The Pantry's business. "While competitors have thrived with the QSR [quick-service restaurant] portion of their businesses, in 10 years, The Pantry has increased its store count by a paltry 28 QSR restaurants in its 1,538 stores and has no restaurant experience on the current board," CPS wrote in today's letter.

In an effort to boost The Pantry's stock price, CPS laid out a six-step plan, including the previous recommendation to implement a proper QSR strategy. Also topping the list is a recommendation to reposition or sell 300 to 500 c-stores "in weak or non-growth markets and focus on great-performing stores in growth markets."

In addition, CPS recommended the possibility of converting The Pantry into a master limited partnership or a real estate investment trust, the latter of which could capitalize on the retailer's vast real estate holdings. The other aspects of CPS' plan call for the Kangaroo Express parent to focus on return on invested capital, decrease board of director pay, slow capital expenditures and pay down debt.

The Pantry has sent several letters of its own to shareholders stating that CPS' board of director nominees are not qualified for the position. The company has urged its shareholders to vote for its board of director candidates, which includes Thomas W. "Tad" Dickson, former CEO of Harris Teeter Supermarkets Inc. 

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