SpartanNash issues retort to activist investor group

SpartanNash has reaffirmed its commitment to its current board, management team and growth plan after an investor group called on shareholders to elect three new directors.

Investors Macellum Advisors GP, Ancora Holdings Group and affiliates on Friday nominated three independent candidates to replace three longtime SpartanNash board members — Chairman Douglas Hacker and directors Margaret Shan Atkins and William Voss — in the election at the grocery distributor’s 2022 annual shareholders meeting. The investor group, which said it owns about 4.5% of SpartanNash’s outstanding common shares, issued a letter to shareholders seeking their support at the meeting, the date of which has not yet been set.

However, Grand Rapids, Mich.-based SpartanNash on Friday described the investor group’s effort as a proxy fight not in shareholders’ best interests and said the company’s recently refreshed board is best-suited to oversee strategy.

“The SpartanNash board and management team are committed to moving the company forward with a clear priority: driving long-term, sustainable value creation for shareholders. The board is confident that the transformation strategy is working and is the best path to continue enhancing performance. The company remains open-minded and receptive to constructive ideas, from any source, that will drive shareholder value,” SpartanNash said in a statement.

Related:Q&A: CEO Tony Sarsam shares SpartanNash’s ‘winning recipe’

“It seems that the investor group’s priority is a proxy contest, not constructive engagement with SpartanNash about ideas that would benefit all shareholders,” SpartanNash stated.

An investor group aims to replace longtime SpartanNash board members Douglas Hacker (pictured left), chairman since last May, and directors Margaret Shan Atkins and William Voss.

In February, SpartanNash expanded its board of directors to 12 members with the appointment of new independent directors Julien Mininberg, Jaymin Patel and Pamela Puryear. The company described the move as a “board refreshment,” as plans call for the board to shrink back to nine members after the shareholders meeting this spring. Current directors Frank Gambino, Yvonne Jackson and Elizabeth Nickels won’t be standing for re-election, SpartanNash said, noting that after the annual meeting eight of its nine board directors will be independent, with five appointed in the last four years.

The investor group said its nominees for the SpartanNash board are Jonathan Duskin, CEO of investment management firm Macellum Capital Management, with more than 20 years of experience investing in retail and consumer sectors; John Fleming, who held executive roles at Walmart from 2000 to 2010, including chief marketing officer and chief merchandising officer overseeing the grocery business and CEO of Walmart.com; and Michael Lewis, former executive vice president and president of retail at OfficeMax, former senior vice president of a global merchandising center for food, consumables and OTC products and president of the Midwest stores division at Walmart, former executive vice president and retail division president at Nash Finch and former vice president of Loblaws Supermarkets. 

Related:SpartanNash board adds three new independent directors

“Our analysis and engagement to date lead us to believe that SpartanNash’s leadership is wed to a flawed corporate structure and has failed to implement basic operating initiatives while leaving $1 billion of owned real estate sitting idle on the balance sheet,” the investor group said in its shareholder letter. “We believe these missteps have resulted in poor operating results and sustained share price underperformance for too long. Moreover, we believe the board’s failure to effectively develop succession plans has resulted in constant chaos in the C-suite, with four changes to the company’s chief executive officer role in five years yet no clear strategy for value creation.”

The investor group said “at least one financial buyer and multiple real estate firms” have been interested in transactions with SpartanNash over the last two years. In addition, outside parties “willing to pay a meaningful premium for the whole company, its real estate or its assets” still hold “substantial interest,” the group said its analysis indicates.

“In light of the numerous concerns outlined in our letter, we believe shareholder-driven change is urgently needed in the boardroom,” the investor group stated in its letter to shareholders.

Hacker became SpartanNash’s chairman in May 2021, taking over from Dennis Eidson, who retired after nearly five years in the position. SpartanNash had announced Hacker as Eidson’s successor in late March 2021. Eidson also served as interim president and CEO of SpartanNash, while remaining chairman, upon the resignation of David Staples in August 2019 until Tony Sarsam began as president and CEO in mid-September 2020. Staples had succeeded Eidson as CEO in May 2016 upon his retirement.

SpartanNash said shareholders have seen an 88% total return since Tony Sarsam joined as CEO in September 2020.

SpartanNash noted that “the company’s strategy is delivering results.” The distributor said its total shareholder return has been 251% since the board transitioned the management team in the summer of 2019 and 88% since Sarsam joined as CEO. “The company also significantly outperformed the S&P 500 over those same time periods,” SpartanNash reported. The distributor, too, emphasized that its board holds extensive public company leadership and operating experience; financial and industry expertise spanning consumer goods, retail and military; significant experience in food distribution, retail and consumer goods; and skill sets including strategy, business and culture transformation, supply chain and technology.

“SpartanNash’s successful progress in its turnaround is the result of prudent actions by the board and thoughtful strategic initiatives well executed by management. These actions are delivering significant business results and shareholder value. If appointed, the investor group’s three handpicked nominees threaten to derail the company’s progress and risk the value of our shareholders’ investment,” SpartanNash said in a statement. “We remain willing to engage with our shareholders and will continue to act in the best interests of the company and all of our stakeholders, including our shareholders, associates, customers, partners and communities. We are united in our focus on driving enhanced value creation.”

Through its core food wholesaling segment, SpartanNash distributes to all 50 states, supplying 145 corporate-run supermarkets in nine Midwestern states — which make up its retail business unit — and over 2,100 independent grocery retailers nationwide. The company also distributes to 160 military commissaries and over 400 exchanges in the United States and internationally.