Dive Brief:
- Denny’s is facing at least two lawsuits from shareholders who allege the company’s proxy statement related to its proposed sale was “false and misleading,” according to a filing submitted to the U.S. Securities and Exchange Commission this week.
- The company said it received multiple demand letters from reported shareholders alleging that its proxy statement was “deficient” and requesting additional disclosures prior to a Jan. 13 special meeting with stockholders. The demand letters also threatened lawsuits if issues with the proxy statement aren’t addressed.
- Denny’s said the claims made in the lawsuits and demand letters “are without merit.”
Dive Insight:
Denny’s entered into a definitive agreement to be sold to a cohort of investors consisting of TriArtisan Capital Advisors, Yadav Enterprises and Treville Capital Group for $620 million in November. The all-cash transaction is expected to close during the first quarter of this year and will take the company private.
The lawsuits claim that the proxy statement didn’t disclose enough information for shareholders to make an informed decision over voting in favor of the transaction. According to the suits, Denny’s did not provide, or it misrepresented, financial projections as prepared by its management; did not disclose information around the financial valuation analysis provided by its financial advisor Truist Securities; and did not discuss potential conflicts of interest among company insiders. Shareholder plaintiffs wanted to know more information about the background of the deal.
The company decided to provide additional information to shareholders to try and “moot the unmeritorious disclosure claims, alleviate the costs, risks and uncertainties inherent in litigation,” according to the filing.
Denny’s said the filing and the provision of more information did not constitute an admission that it needed to disclose more information.
“To the contrary, the Company specifically denies all allegations set forth in the Lawsuits and the Demand Letters that any additional disclosure in the Proxy Statement was or is required.”
Denny’s has dealt with investor criticism in the past. Prior to its buyout, the chain faced pressure from activist investor JCP Investment Management last September. That investor wanted to meet with the board to discuss ways to increase the company’s value after several quarters of same-store sales declines.
