Denny’s Sees Shareholder Activist Grand Slam (DENN)

Denny’s Corp. (NASDAQ: DENN) is under fire from an activist investor group.  A filing with the SEC this morning from a group of shareholders including Oak Street, Lyrical, DASH Acquisitions, Soundpost, and individuals is seeking several issues in a proxy battle.   The Committee to Enhance Denny’s own about 6,245,476 shares of common stock of Denny’s Corporation, representing approximately 6.3% of the outstanding common stock of the company.  Some shareholder activist movements seem overly aggressive.  The difference between that and this str the performance metrics.  We have not double-checked the activist figures yet, but they look as though they will be hard for management to ignore.

The group noted that Denny’s has lost the #1 market position to International House of Pancakes, has failed to grow system-wide restaurants, has seen unacceptable declines in key operating trends such as guest traffic, has very high general and administrative expenses, has made poor capital allocation decisions, has a lack of accountability for management at the board level, and has seen very poor share performance.

The proxy proposals are as follows:

1. To elect DASH’s three proposed director nominees in opposition to three of the Denny’s incumbent directors whose terms expire at the Annual Meeting,
2. To consider and vote on a proposal to ratify the selection of KPMG LLP as the independent registered public accounting firm of the Company and its subsidiaries for the year ending December 29, 2010, and
3. To transact such other business as may properly come before the Annual Meeting.

The group noted on the share performance that January 8, 1998 was the day after Denny’s emerged from bankruptcy.  At the time its new shares closed at $9.50 per Share, yet on December 31, 2009 the stock was only at $2.19 for a drop of -76.9% in cumulative total stockholder return during this period.  Shares closed at $3.89 on Friday and the stock is up 1.3% at $3.94 this morning.

That full filing with more detail is here.

JON C. OGG