Ingles to Bring Activist Aboard, but Rejects Proposed Changes to Voting Power

Ingles Markets has agreed to support one of the two candidates nominated by a shareholder for a board seat, but will vote against a proposal that would limit the “supersize” voting power of its private stock holders.

The moves, announced in a proxy statement Tuesday, acknowledged investors' concern regarding a lack of independent control of the company, but stopped short of surrendering it. Ingles, based in Asheville, N.C., operates 200 stores in the Southern states.

As previously reported, Gamco Asset Management in November launched a proxy fight that it said would give investors a greater say in the company’s decisions by nominating two independent directors to stand for election at the retailer’s annual meeting. Ingles in a proxy filed Tuesday said it subsequently agreed with Gamco to nominate one of its suggested candidates, John “Jack” Lowden, to a board seat to be elected by holders of the company’s Class A publicly traded stock.

Gamco, based in Rye, N.Y., had acquired as much as 16.5% of Ingles’ Class A shares by late last year. It had argued that Ingles' board “may lack the objectivity and independence necessary to perform its critical oversight role and to evaluate opportunities on behalf of all stockholders.”

Ingles said it would oppose a separate shareholder proposal to assign one vote for each owned share of the company stock. Ingles currently provides holders of its private Class B stock 10 votes for every share owned, vs. one vote per share for Class A stock holders.

“With stock having 10 times more voting power, our company takes our shareholder money but does not give us in return equal voice in our company’s management,” the shareholder, who was not identified in the proxy, argued. “Without a voice, shareholders cannot hold management accountable.”

Ingles said it has only utilized two classes of stock since it became a publicly traded company in 1987, “giving Class A shareholders over 29 years to balance the risks and rewards of stock ownership in the company.” Class A shareholders receive higher dividends in exchange for lesser voting control, the company said. 

Ingles' Class B stock is controlled by Ingle family members and its management team, led by chairman Robert P. Ingle II. The Ingle family owned 76% of the combined voting power and 28% of the total number of shares of the company’s Class A and Class B stock, as of the end of its fiscal year Sept. 30.

“Robert P. Ingle II has informed the company that he, in his capacity as a stockholder, intends to vote against the stockholder proposal,” the proxy said. “Mr. Ingle II controls approximately 75% of the outstanding voting power. If Mr. Ingle II does vote against the proposal, it will not receive a sufficient number of favorable votes to be approved.”

Lowden, 60, has served as the president and chief investment officer of NewCastle Partners LLC, a private investment firm founded in 2001 that acquires manufacturing and specialty distribution businesses. He will stand for election of the Class A shareholders along with Ernest Ferguson, who has served on Ingles' board since 2014.

Class B director nominees standing for election are Fred Ayers, Ronald Freeman, Robert Ingle, II, James Lanning, Laura Ingle Sharp and Brenda Tudor. All six are current directors. Freeman is Ingles' CFO; Tudor is Freeman's predecessor as CFO; and Lanning is its CEO. Laura Ingle Sharp is an older sibling of Robert Ingle II.