Denny’s provided more detail about what led up to the sale. | Photo: Shutterstock
Two Denny’s shareholders are suing the company over its pending sale, arguing that Denny’s did not give investors the full background on the $620 million deal.
The two lawsuits were filed in New York State Supreme Court in mid-December, about a month and a half after Denny’s announced it had agreed to sell itself to TriArtisan Capital Advisors, Treville Capital Group and Yadav Enterprises for $6.25 per share.
The lawsuits argue that a December proxy filing regarding the deal left out or misrepresented details of the agreement, including how the company arrived at the $620 million valuation; its financial projections; and potential conflicts of interest.
The plaintiffs say that without more detail, shareholders can’t make an informed decision when they vote on whether to approve the deal on Jan. 13.
Denny’s said that it has also received letters from multiple shareholders demanding more information and threatening to sue the company if it did not address their concerns.
The diner chain is now taking steps to fill in the blanks. In an SEC filing Monday, Denny’s provided more details about the sale process in hopes of putting an end to the litigation, though it noted that it believes the lawsuits’ claims are without merit.
The filing includes more details about how the company calculated its financial projections. It also includes a fuller picture of how investment bank Truist Securities helped it come up with a price of $6.25 per share.
Truist’s analysis looked at the values of other similar restaurant companies, as well as the value and multiples of more than a dozen full-service restaurant acquisitions dating back to 2011.
The lawsuits took issue with the fact that the proxy report provided only averages and ranges, rather than the values and multiples for each individual company and transaction Truist looked at. The updated filing provides values and multiples for each.
In the initial proxy statement, Truist concluded an implied value range for Denny’s of $4.35 to $5.74 per share, lower than the agreed-upon $6.25, a 52% premium over Denny’s closing share price when the deal was announced on Nov. 3.
As for the potential conflicts of interest, the lawsuits said that the initial statement failed to disclose whether the buyer group had said anything about management retention following the acquisition. In the Monday filing, Denny’s added that the buyers had said they expected to retain “substantially all” of the company’s employees but did not mention specific employees or arrangements.
Shareholder scrutiny over a proposed sale is not uncommon. In 2024, Chuy’s shareholders aired similar concerns about the chain’s proposed sale to Darden Restaurants. In response, Chuy’s provided additional details, and the sale was ultimately approved.
If Denny’s sale goes through, it will take the chain private for the first time in nearly 30 years. The buyer group has extensive restaurant experience. TriArtisan owns P.F. Chang’s and previously held large stakes in TGI Fridays and Hooters. Yadav is a franchisee of Denny’s, Jack in the Box and TGI Fridays restaurants and also owns Del Taco, Taco Cabana and Nick the Greek.
Spartanburg, South Carolina-based Denny’s had been struggling prior to the deal. It was working to turn around slumping sales and traffic and was in the process of closing 90 locations. Its stock was down 32% year to date before the sale was announced.
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