NASHVILLE Tenn. O’Charley’s Inc. has averted a proxy battle with 12-percent stakeholder Crescendo Partners by putting former Arby’s chief Douglas Benham and two others on its board of directors.
Under the agreement disclosed Thursday, O’Charley’s, the operator or franchisor of 364 casual-dining restaurants, has expanded its board to 11 seats, from nine. In addition to Benham, the one-time president and chief executive of Arby’s Restaurant Group, the new directors are Arnaud Ajdler, a managing director at Crescendo, and Gregory Monahan, a senior vice president of the investment firm.
Under the deal, O'Charley's director John E. Stokely agreed to step down from the board.
As part of the settlement, Crescendo agreed not to increase its stake to more than 13 percent of O’Charley’s outstanding shares. If Crescendo’s holdings in the restaurant company fall to less than 5 percent, the hedge fund’s board representation would drop to two executives. If Crescendo’s holdings fall to less than 1 percent, it would receive no representation on the board.
O’Charley’s three new directors were on the slate of nominees that Crescendo first presented in December. The terms of Ajdler and Monahan expire in 2009. Benham’s term ends in 2010.
In December, Crescendo nominated four executives to O’Charley’s board and threatened a proxy battle ahead of the restaurant company’s annual shareholder meeting, which is now slated for May or June. New York-based Crescendo, a well-known activist hedge fund run by Eric Rosenfeld, had amassed through its funds and affiliates a near 12-percent holding in O’Charley’s for about $37.6 million. Crescendo has said O’Charley’s stock was undervalued and that if elected to the restaurant company’s board it would urge the exploration of a large stock repurchase, sale-leaseback transactions, refranchising efforts and a sale of O’Charely’s Stoney River Legendary Steaks brand or a sale of the entire company.
O’Charley’s operations include 240 namesake restaurants, 114 Ninety Nine Restaurant locations and 10 Stoney River units.
