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Red Robin Rejects Vintage Capital Buyout Offer, Appoints CEO

Zacks Equity Research

Putting an end to speculations, Red Robin Gourmet Burgers, Inc. RRGB has rejected Vintage Capital Management's offer to acquire 100% of the company’s shares for $40 per share. Vintage Capital Management, which already owns 11.6% of Red Robin’s shares, is the third-largest shareholder of the company.

Management stated that “the board unanimously determined that the proposal undervalues Red Robin and is not in the best interests of all shareholders.” Red Robin is quite confident about making the turnaround on the back of its recent growth strategies. In the past three months, the company has gained 23.4% compared with the industry’s 8.6% growth.

Moreover, Red Robin, which has been searching for CEO since the retirement of Denny Marie in April, finally appointed Paul Murphy as the chief executive officer, effective Oct 3. Murphy has served as the executive chairman of Noodles & Co. since 2017 and CEO of Del Taco Restaurants from 2009 to 2017.

He has an exceptionally good track record. In fact, Noodles & Company posted four straight quarters of positive comps and Del Taco Restaurants performed well under his leadership.

Board chairwoman and interim CEO Pattye Moore stated that “The board is confident Paul is the right leader to drive the continued transformation of Red Robin and restore the company to sustainable growth and profitability.”

Apart from brand revitalization efforts, this Zacks Rank #3 (Hold) company is focused on menu innovation, operational improvement and a better customer service platform. The company continues to launch a variety of salads, appetizers, innovative desserts and adult beverages as well as kids’ menu. Notably, Red Robin’s marketing strategy emphasizes on driving traffic with everyday value advertising of premium burgers, appetizers, beverage and desserts.

Key Picks

Better-ranked stocks worth considering in the same space include Dave & Buster's Entertainment, Inc. PLAY, The Wendy's Company WEN and Shake Shack Inc. SHAK, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dave & Buster's Entertainment, Wendy's and Shake Shack have an impressive long-term earnings growth rate of 14.8%, 14.3% and 22.5%, respectively.

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Red Robin Gourmet Burgers, Inc. (RRGB) : Free Stock Analysis Report
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