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Pantry Shareholders Vote for Change

RALEIGH, N.C. -- Changes are on the horizon at The Pantry Inc.

At today's Annual Meeting of Stockholders, held in Raleigh, Pantry shareholders voted to elect three new members to the board of directors proposed by Concerned Pantry Shareholders (CPS), a dissident group led by Houston investment group JCP Investment Management LLC and Connecticut investment group Lone Star Value Management LLC.

The new board members are Todd E. Diener, former executive officer of Brinker International Inc., where he served as president of Chili's Grill & Bar and On the Border restaurants; James C. Pappas, managing member of JCP Investment Management, who is also chairman of the board of the compensation and leadership committee of Morgan's Foods, operator of wholly owned KFC, Taco Bell and Pizza Hut restaurants; and Joshua A. Schechter, director of Adrenas Co. Ltd., a multinational company engaged in hair-related businesses.

"We appreciate the overwhelming support from The Pantry' shareholders for all three of our nominees," Pappas and Jeff Eberwein, CEO of Lone Star Value Management, said in a statement. "We fully understand the mandate to work with the board and management to enhance value for the benefit of all shareholders. We have already begun planning with management and the new board, and are excited to work hard to improve the performance and fundamental value of The Pantry."

According to CPS, Pappas and Diener were elected by a 6-to-1 ratio, while Schechter was elected by a 4-to-1 ratio. The results will become official once the votes are certified in the next few days.

Another new member elected to the board is Thomas W. "Tad" Dickson, former CEO of Harris Teeter Supermarkets Inc., who was proposed for election by The Pantry.

Therefore, despite today's vote, board of director members backed by The Pantry will still number six, compared to only three members supported by CPS. The dissident firm could go after more board seats next year.

The Pantry issued the following statement: "We appreciate the consideration and support of our stockholders, as well as the insights they shared with our board and management team throughout this election process. While a number of different ideas and perspectives were expressed during this process, at the end of the day all interested parties share the common goal of creating value for The Pantry's stockholders. The incumbent board and management team welcome the new directors and intend to work cooperatively with them to successfully execute the company's strategic plan and deliver superior returns for The Pantry's stockholders.

As a result of today's vote, three incumbent board members lost their seats. Removed from the board are Robert F. Bernstock, a Pantry board member since 2005 who formerly held executive positions at Campbell Soup Co.; Edwin J. Holman, who served as The Pantry's interim CEO from Oct. 5, 2011 to March 5, 2012; and Thomas M. Murnane, co-founder, co-owner and principal of ARC Business Advisors LLC.

"We would like to take this opportunity to thank Robert F. Bernstock, Edwin J. Holman and Thomas M. Murnane for their service on The Pantry's board and their many contributions to the company," The Pantry wrote in its statement.


Over the past several months, CPS has argued The Pantry must make several changes to boost its share price, including improving its quick-service restaurant (QSR) operations.

Converting The Pantry into a real estate investment trust or master limited partnership has also been discussed. In addition, CPS has recommended The Pantry sell at least 300 underperforming stores, many of which it said are not suitable for QSRs.

CPS owns a combined 1.9 percent of The Pantry's stock. When looking at three- and five-year time horizons, the NASDAQ-listed stock has underperformed compared to convenience store competitors Alimentation Couche-Tard Inc., Susser Holdings Corp. and Casey's General Stores Inc. The Pantry's stock traded as low as $11 per share in October. But since word of CPS' involvement in a proxy battle became public, the share price has risen dramatically, trading as high as $15.61 today.

Bonnie Herzog, managing director at Wells Fargo Securities LLC, wrote in a research report that today's vote is positive for The Pantry. "Broadly speaking, we are encouraged by the addition of these new board members and we believe they will work constructively with [The Pantry's] current management to effect positive change," she said. "… Bottom line: We believe [The Pantry] should continue to evolve into a more sophisticated retailer."

Cary, N.C.-based The Pantry operates 1,537 Kangaroo Express stores in 13 states.

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