Bed Bath & Beyond Succumbs to Activists

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Bed Bath & Beyond Inc. (NASDAQ: BBBY) is in the midst of transformational changes to the organization. Now, the retailer is making some big changes at the top — in its board of directors.

The firm announced that it is appointing four new independent directors to the board. With these appointments, the board will have 13 directors, 12 of whom have joined the board within the past two years, 12 of whom are independent and seven of whom are women.

All members of the board have been selected for their complementary skill sets and shared commitment to improve the company’s performance and drive value for all Bed Bath & Beyond stakeholders as the business continues to evolve.

In a note by Wedbush, the boutique brokerage firm said:

This morning, Bed Bath & Beyond entered into a cooperation and support agreement with the activist investor group (Legion Partners, Macellum Advisors, and Ancora Advisors). Bed Bath & Beyond also announced the appointment of four new independent directors (John E. Fleming, Sue E. Gove, Jeffrey A. Kirwan and Joshua E. Schechter) that were proposed Board candidates by the activist group…

In connection with the new Board appointees, the activists have agreed to withdraw its list of nominees and support all of the Bed Bath & Beyond-recommended director nominees at the 2019 and 2020 Annual Meetings of Shareholders. The settlement with the activists does not surprise us, as we have been of the view it would be very difficult for the activists to gain a majority of the board seats in a proxy contest. With some board representation, the activist-backed directors can influence key decisions, but do not have the majority power to make decisions. Moreover, key decisions around the go-forward plan are still in the planning phase, with no major changes likely until after the CEO search conclusion.

Consequently, Wedbush reiterated a Neutral rating for the firm and lowered its price target to $14 from $19.

Shares of Bed Bath & Beyond were down about 4% on Wednesday at $12.91, in a 52-week range of $10.46 to $21.45. The consensus price target is $17.87.


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