Seeking to quell a brewing shareholder revolt, Japanese steakhouse chain Benihana caved in to a dissident shareholder’s demands for a seat on the board.
The company said yesterday it would back Coliseum Capital Management co-founder Adam Gray for election at its annual meeting next month. In exchange, the New York hedge fund agreed to give up its proxy fight.
Moreover, Miami-based Benihana said it would reimburse Coliseum for up to $250,000 in costs it incurred to get Gray on the board, according to an SEC filing. It also offered him spots on several key committees, including the audit committee and another committee to review a possible sale of the company.
Last month, Benihana announced that it was reviewing “strategic alternatives,” including a potential sale, amid shareholder unrest over the company’s sagging financial performance.
Gray, whose hedge fund owns nearly 15 percent of the Class A shares, had been battling for one seat, while the heirs of Benihana’s late founder, Rocky Aoki, who own 38 percent of the common shares through a family trust, are battling for two seats.
Shareholders are set to decide at the Sept. 14 shareholder meeting.
Gray will take over the seat of the Benihana chairman, Darwin Dornbush, who won’t stand for reelection, although Gray is unlikely to be automatically crowned chairman, sources said.
Meanwhile, the heirs are expected to continue their battle to take over the seats from CEO Richard Stockinger and Lewis Jaffe.
In his proxy materials from earlier this month, Gray accused directors of using their board seats to enrich themselves.
For instance, Dornbush’s law firm has collected close to $4 million from Benihana for legal services since 2007. Benihana has also paid Dornbush more than $450,000 in salary and benefits for “management advisory services” over the last two years.
“We strongly believe that directors should be focused entirely on creating value for the stockholders and not be subject to distraction by other relationships or financial interests,” Gray said in his filing with the SEC.