- In a strongly worded open letter to Supervalu's board, activist investor Blackwells Capital reinforced its threat to replace six members of the grocery and wholesaler's board of directors at the company's annual meeting, which is yet to be scheduled. In March, Blackwells put forth six nominees for Supervalu's nine-seat board of directors.
- The firm, which owns a 5.2% stake in the company, claims that Supervalu's current leadership is "a Board that does not lead, but simply reacts," and has espoused a "a misguided and haphazard strategy" that has led to company stock trading at near-six-year lows.
- The letter essentially promises a shareholder revolt at the annual meeting, which usually takes place in the summer — but there is no date yet for it yet. The letter indicates Blackwells thinks Supervalu is stalling. "Procrastination, delay tactics and defensive half measures are elements that got us to where we are, not to where we should be," the letter reads. "Stop the value destruction for the benefit of all shareholders."
There's nothing quite like loudly airing grievances to call attention to issues that need to be addressed. It's a strategy Blackwells Capital has used to its benefit, but it's unclear if it will work in this case. After all, previous strongly worded statements asking for much the same things — representation on the board of directors to bring about real changes in the business — have largely gone unheeded.
Compared to Blackwells' last note to Supervalu in February, much has changed. Supervalu announced in March it would exit its Farm Fresh banner, then the next month decided to sell its Shop 'n Save chain along with eight warehouses. But these steps haven't done enough to improve value and satisfy the activist investor. In March, Blackwells launched a proxy fight when it nominated six nominees for the company's board, including two highly experienced former retail executives, Rick Anicetti and Frank Lazaran.
Blackwells has increased its stake in the company, which was at about 4.4% two months ago. One of their main concerns now is the lack of a forum to bring new board members to the mix.
Supervalu, meanwhile, maintains it's righting the ship by pumping up its wholesale division while jettisoning underperforming parts of its retail arm. The company's Cub Foods banner is still a market share leader in the Upper Midwest, and Supervalu executives have said they value retail stores' ability to inform their wholesale operations.
“Already in the first two months of fiscal 2019, we’ve capitalized on our business momentum by taking several decisive, strategic actions that further our transformation,” Supervalu CEO Mark Gross said during the company's most recent earnings call.
So what does Blackwells really want for Supervalu? According to a presentation Blackwells has available at a website it runs with the URL savesupervalu.com, the retailer-wholesaler's stock has gone down 93% in the last 12 years. The investor wants more of the company's warehouses generating income through leaseback agreements or the retail segment completely sold off. A host of other options to bring shareholder profits up are also listed — though replacing board members, many of whom the presentation says don't have relevant experience, is one of the more prominent ideas.
Supervalu is slowly making financial progress. Its profits and comp store sales were slightly up in its last earnings report. After the retailer and wholesaler reported its earnings, analysts became less pessimistic, but say more quarters of growth are needed to turn Supervalu around. Whether this is fast enough for Blackwells remains to be seen.
Either way, Supervalu can easily deliver on one of Blackwells' demands: Scheduling an annual shareholders meeting to address these issues. While Blackwells is one of the largest shareholders in the grocery and wholesaler's stock, more than 90% of it is in other hands. Between now and then, it has opportunity to continue taking steps to appease the activist investor — and in the meantime could give its other shareholders reasons to hold on to the six board members with targets on their backs.