Del Frisco's Restaurant Group, Inc. (NASDAQ: DFRG) shares eased Friday morning after the company disclosed that its board unanimously adopted a shareholder rights plan. Activist investor Engaged Capital acquired a 10% stake in Del Frisco's.
Officials of Engaged Capital, out of Newport Beach, Calif., announced Thursday, "We acquired a position in the Company because we believe shares in DFRG’s high quality dining concepts are currently trading well below their intrinsic value. Furthermore, we believe there are numerous parties interested in acquiring the Company’s concepts at valuations that would deliver a significant premium to the current share price and be very attractive to the Company’s shareholders.
"Accordingly, we see a substantial opportunity for the Company’s board of directors (the "Board") to correct recent strategic missteps and create shareholder value by (1) proactively appointing shareholder representatives to the Board, (2) hiring financial advisors, and (3) forming a strategic review committee consisting of the independent members of the Board to oversee and manage a process to evaluate strategic alternatives."
Engaged went on to say in its letter to shareholders, that "despite DFRG’s poor operating and share-price performance, it owns a number of highly attractive dining concepts, the value of which is clearly not reflected in the Company’s enterprise valuation."
They points to DFRG’s Double Eagle concept, which they say "is one of the premiere high-end dining concepts in the U.S. With AUV’s in excess of $14 million per restaurant, restaurant-level EBITDA margins of 25%, and the potential to triple the unit count in the U.S., we believe the Double Eagle is an iconic brand with staying power."
DFRG shares lost 14 cents, or 1.8%, to $7.76
