HOUSTON, April 12, 2017 /PRNewswire/ -- JCP Investment
Management, LLC, together with its affiliates and the other
participants in its solicitation (collectively, "JCP" or "we"),
collectively one of the largest stockholders of Fiesta Restaurant
Group, Inc. ("Fiesta" or the "Company") (NASDAQ:FRGI), with
aggregate ownership of approximately 8.7% of the Company's
outstanding shares, today issued a letter to the Chairman of
Fiesta's Board of Directors. The full text of the letter
follows:
April 12, 2017
Fiesta Restaurant Group, Inc.
14800 Landmark Boulevard, Suite 500
Dallas, Texas 75254
Attn: Stacey
Rauch, Chairman of the Board
Dear Stacey,
As you know, we own approximately 8.7% of the outstanding shares
of Fiesta Restaurant Group, Inc. ("Fiesta" or the "Company"),
making us the Company's third largest stockholder. Dating back to
August of last year, we have sought to work constructively with
Fiesta's Board of Directors (the "Board") and management team in an
effort to drive stockholder value and improve the Company's
corporate governance. Following the Company's apparent
unwillingness to entertain serious discussions regarding Board
refreshment, we nominated a slate of three highly qualified
individuals for election to the Board at the upcoming annual
meeting that we believe would greatly enhance the Board.
Despite our nomination, we continued to seek an amicable
resolution with the Board in an effort to avoid an expensive and
time consuming proxy contest. Unfortunately, we do not believe
that the Board's recent offer adequately addresses
the shortcomings of the composition of the Board or protects the
best interests of the Company's stockholders.
The driving factor behind our belief is the makeup of the
current seven-member Board. Six of the seven incumbent directors
have overseen a 60%+ decline in Fiesta's share price from its 2015
peak, and under their leadership, the Company's total shareholder
returns have been negative over the past one, two and three-year
periods. These same directors authorized the expenditure of more
than $70 million on the failed
expansion of Pollo Tropical into Texas and oversaw a corporate structure with
bloated SG&A expenses, including three corporate centers. In
addition, the recent performance of the Company is concerning, with
transaction counts down 4.5% and 7.3%, respectively, at Taco Cabana
and Pollo Tropical in the fourth quarter of 2016.
Furthermore, the Board consists largely of directors with little
to no industry operating experience nor any personal investment in
Fiesta stock. In fact, Paul E.
Twohig, who was just appointed as a director effective
February 28, 2017, is the only
director who has made an open market purchase of Fiesta
shares.1 In addition, we note that three of the seven
directors are affiliated with Jefferies, including directors
Barry J. Alperin and Brian P. Friedman, who are up for election at
the upcoming annual meeting. It should be noted that Jefferies sold
its entire position in 2013 after previously owning approximately
28.3% of the Company at the time of its spin-off in 2012.
While we welcome the appointment of Mr. Twohig to the Board, who
we believe is independent and brings considerable industry
expertise, we do not think his addition alone is sufficient to
offset the lack of industry experience and apparent misalignment of
interests between the incumbent directors and Fiesta's
stockholders.
As such, we find the Board's recent offer contemplating the
addition of one of our candidates now and a separate
individual to be identified by the Board at a later date to be
unacceptable given the lack of assurance that the person selected
would be mutually agreeable to both parties. In addition, we are
unwilling to commit ourselves to a multi-year standstill period
given the current classified Board structure because we believe
this would effectively serve to further entrench the incumbent
directors who have overseen significant destruction of stockholder
value.
We strongly believe that any potential agreement must involve
the immediate addition of two highly qualified director candidates,
who together will bring significant operating experience and an
owner's perspective into the boardroom. We believe adding such
individuals to the Board would remedy the Board's apparent lack of
restaurant expertise and avoid a seemingly unnecessary election
contest, which we believe could only benefit the entrenched
directors who we do not believe belong on the Board. Therefore, to
simplify the choice for stockholders at the upcoming annual
meeting, we intend to withdraw our nomination of Joshua E. Schechter and seek the election of our
remaining candidates James C. Pappas
and John B. Morlock, both of whom
have significant experience in the restaurant industry, in
opposition to Messrs. Alperin and Friedman.
While we remain open to a collaborative process regarding Board
composition, we are fully prepared to see this through to a vote at
the upcoming annual meeting, if necessary, to ensure that
stockholders have the opportunity to vote for the most highly
qualified candidates to represent their interests.
We look forward to your prompt response.
Sincerely,
James C. Pappas
CERTAIN INFORMATION CONCERNING THE
PARTICIPANTS
JCP Investment Management, LLC, together with the other
participants named herein (collectively, "JCP"), intends to file a
preliminary proxy statement and an accompanying proxy card with the
Securities and Exchange Commission ("SEC") to be used to solicit
votes for the election of its slate of three highly qualified
director nominees at the 2017 annual meeting of stockholders of
Fiesta Restaurant Group, Inc., a Delaware corporation (the "Company").
JCP STRONGLY ADVISES ALL STOCKHOLDERS OF THE COMPANY TO READ THE
PROXY STATEMENT AND OTHER PROXY MATERIALS AS THEY BECOME AVAILABLE
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH PROXY
MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SEC'S WEB SITE AT
HTTP://WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS IN THIS PROXY
SOLICITATION WILL PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT
CHARGE, WHEN AVAILABLE, UPON REQUEST.
The participants in the solicitation are JCP Investment
Partnership, LP ("JCP Partnership"), JCP Single-Asset Partnership,
LP ("JCP Single-Asset"), JCP Investment Partners, LP ("JCP
Partners"), JCP Investment Holdings, LLC ("JCP Holdings"), JCP
Investment Management, LLC ("JCP Management"), James C. Pappas, BLR Partners LP ("BLR
Partners"), BLRPart, LP ("BLRPart GP"), BLRGP Inc. ("BLRGP"),
Fondren Management, LP ("Fondren Management"), FMLP Inc. ("FMLP"),
Bradley L. Radoff, Bandera Master
Fund L.P. ("Bandera Master Fund"), Bandera Partners LLC ("Bandera
Partners"), Gregory Bylinsky,
Jefferson Gramm, Lake Trail Managed
Investments LLC ("Lake Trail Fund"), Lake Trail Capital LP ("Lake
Trail Capital"), Lake Trail Capital GP LLC ("Lake Trail GP"),
Thomas W. Purcell, Jr., Joshua E. Schechter, John B. Morlock and Alan
Vituli.
As of the date hereof, JCP Partnership beneficially owned
470,762 shares of common stock, $0.01
par value per share ("Common Stock"). As of the date hereof,
JCP Single-Asset beneficially owned 234,846 shares of Common Stock.
JCP Partners, as the general partner of each of JCP Partnership and
JCP Single-Asset, may be deemed the beneficial owner of the 705,608
shares of Common Stock owned in the aggregate by JCP Partnership
and JCP Single-Asset. JCP Holdings, as the general partner of
JCP Partners, may be deemed the beneficial owner of the 705,608
shares of Common Stock owned in the aggregate by JCP Partnership
and JCP Single-Asset. JCP Management, as the investment
manager of each of JCP Partnership and JCP Single-Asset, may be
deemed the beneficial owner of the 705,608 shares of Common Stock
owned in the aggregate by JCP Partnership and JCP
Single-Asset. Mr. Pappas, as the managing member of JCP
Management and sole member of JCP Holdings, may be deemed the
beneficial owner of the 705,608 shares of Common Stock owned in the
aggregate by JCP Partnership and JCP Single-Asset. As of the date
hereof, BLR Partners beneficially owned 615,000 shares of Common
Stock. BLRPart GP, as the general partner of BLR Partners,
may be deemed the beneficial owner of the 615,000 shares owned by
BLR Partners. BLRGP, as the general partner of BLRPart GP,
may be deemed the beneficial owner of the 615,000 shares owned by
BLR Partners. Fondren Management, as the investment manager
of BLR Partners, may be deemed the beneficial owner of the 615,000
shares owned by BLR Partners. FMLP, as the general partner of
Fondren Management, may be deemed the beneficial owner of the
615,000 shares owned by BLR Partners. Mr. Radoff, as the sole
shareholder and sole director of each of BLRGP and FMLP, may be
deemed the beneficial owner of the 615,000 shares owned by BLR
Partners. As of the date hereof, Bandera Master Fund beneficially
owned 397,239 shares of Common Stock. Bandera Partners, as the
investment manager of Bandera Master Fund, may be deemed the
beneficial owner of the 397,239 shares of Common Stock owned by
Bandera Master Fund. Each of Messrs. Bylinsky and Gramm, as the
Managing Partners, Managing Directors and Portfolio Managers of
Bandera Partners, may be deemed the beneficial owner of the 397,239
shares of Common Stock owned by Bandera Master Fund. As of the date
hereof, Lake Trail Fund beneficially owned 600,000 shares of Common
Stock. Lake Trail Capital, as the Manager and Investment Manager of
Lake Trail Fund, may be deemed the beneficial owner of the 600,000
shares of Common Stock owned by Lake Trail Fund. Lake Trail GP, as
the general partner of Lake Trail Capital, may be deemed the
beneficial owner of the 600,000 shares of Common Stock owned by
Lake Trail Fund. Mr. Purcell, as the sole member of Lake Trail GP,
may be deemed the beneficial owner of the 600,000 shares of Common
Stock owned by Lake Trail Fund. As of the date hereof, Mr.
Schechter beneficially owned 19,400 shares of Common Stock,
including 1,700 shares of Common Stock directly owned by his
spouse. As of the date hereof, Messrs. Morlock and Vituli did not
beneficially own any Common Stock.
Investor Contact:
James C. Pappas
JCP Investment Management, LLC
(713) 333-5540
1 Does not include recent purchases made by Leucadia
National Corporation, a multi-billion dollar holding company of
which director Brian P. Friedman
serves as President and a director.
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SOURCE JCP Investment Management, LLC