Buffalo Wild Wings Activist Marcato Calls for CEO to Leave

(Bloomberg) -- Marcato Capital Management LP is pushing Buffalo Wild Wings Inc. to replace its chief executive officer, the activist investor’s latest move in its proxy fight against the beer-and-wings eatery.

Mick McGuire’s San Francisco-based fund officially filed Thursday to nominate four dissident directors for election at Buffalo Wild Wings’ upcoming annual meeting, after it said the company’s board rejected an alternative plan to remove CEO Sally Smith and seek a successor.

Shares of Minneapolis-based Buffalo Wild Wings rose 3.8 percent to $160.30 in New York at 11:20 a.m., valuing the company at about $2.6 billion.

Marcato on Thursday nominated McGuire to join the board along with Scott Bergren, Sam Rovit and Lee Sanders. It said Jerry Rose, a member of Buffalo Wild Wings’ governance committee, had rebuffed Marcato’s proposal to withdraw its nominations if just McGuire and Rovit were added and as long as Smith stepped down. The investor also released a new letter and 50-slide presentation outlining its criticisms and proposals for Buffalo Wild Wings.

Buffalo Wild Wings’ “board has blindly stood by management as the company experienced sustained declines in customer traffic, comp-store sales, margins, returns on capital and guest experience ratings, made flawed capital deployment decisions, and continues to dismiss the merits of a more highly-franchised business,” McGuire wrote. “The status quo is unacceptable -- oversight and accountability must be restored and CEO Sally Smith must be replaced.”

A spokeswoman for Buffalo Wild Wings said the company’s performance has consistently led the casual dining industry over the last decade, generating total returns for shareholders of 1,697 percent under Smith’s leadership since the initial public offering in 2003.

Marcato, which owns more than 6 percent of Buffalo Wild Wings, publicly disclosed its activist holding July 25 and has referred to meetings it’s held with the company since June. Buffalo Wild Wings’ responses have included vowing to increase stock buybacks and accept input, as well as announcing its own board changes.

McGuire founded Marcato in 2010 with startup capital from Blackstone Group LP after leaving Bill Ackman’s firm, Pershing Square Capital Management. The fund primarily invests in small- and mid-size public companies and looks for ways to make them more valuable.