NEW YORK -- Activist shareholders ratcheted up their drive for a new board of directors at CST Brands Inc. this week.
For months, critics have accused CST’s leadership of lacking a sound strategy to boost shareholder value and featuring a board of directors short on convenience-store retail experience.
This Week’s Action
On Monday, one of the dissenting parties, New York-based Engine Capital LP, revealed its proposed slate of directors, one stacked with c-store retail experience, as reported in a McLane Co./CSP Daily News Flash. Engine Capital and fellow investor group JCP Investment Management LLC have challenged CST’s leadership team since December.
Click here for a breakdown of Engine Capital’s complaints.
The slate includes:
- Rocky Dewbre, former executive vice president of channel operations at Sunoco LP and president and CEO of Susser Petroleum Partners LP.
- Bryan Smith Jr, previously executive vice president and chief administrative officer at 7-Eleven Inc.
- Daniel Pastor, previously CEO of MACS Convenience LLC, which was acquired in 2013 by Sunoco.
- Brad Favreau, a partner at Engine Capital Management.
“Despite all of our concerns, we believe that CST is a valuable and strategic asset," said Engine, which is led by Favreau and Arnaud Adjler. “We believe a significant number of shareholders share our concerns and have reached a similar conclusion.”
CST Brands executives have roundly rebutted the attacks, pointing to modest year-over-year sales growth, a recently launched rebranding effort, new, larger-format groundups and a soon-to-be-triggered sale/leaseback strategy. In addition, CST has defended the composition of its board, citing a healthy blend of retail, financial and marketing experience.
In response to Engine’s latest move, CST shared the following response with CSP Daily News: “CST’s board and management team are committed to acting in the best interests of the company and all its stockholders. The company's board and nominating and governance committee will review any formally proposed nominees in accordance with CST’s corporate governance policies.”
At Risk
CST’s board of directors is comprised of 11 members, including nine independent directors. Four directors’ terms will expire this year.
They are:
- William Moll: Sits on CST’s nominating and governance committee. Moll served as president and CEO at Alamo Public Telecommunications Council from 2009 to 2012 and prior held various leadership positions at Clear Channel Communications (reorganized in 2014 as iHeartMedia).
- Ruben Escobedo: Sits on CST’s audit committee. With a strong accounting background, Escobedo has worked for both private and publicly traded companies, and from 1994 to 2014 served as a board director and chair of the audit committee of Valero Energy Corp., the company CST Brands was spun off from in 2013. In the 1970s, Escobedo was president at Texas grocery chain Handy Andy Inc.
- Alan Schoenbaum: Chairs CST’s executive committee. A lawyer by trade, Schoenbaum is cofounder and managing director of venture capital firm BuildGroup, which invests in fast growing technology companies. From Dec. 2005 until Feb. 2014, Schoenbaum served as senior vice president and general counsel at Rackspace Hosting Inc., a publicly traded, cloud-computing company.
- Denise Incandela: Sits on CST’s compensation committee. Incandela brings broad experience in brand management and consumer marketing. She is president of Global Digital and Customer Intelligence for the Ralph Lauren Corp. From 2011 to 2013, Incandela served as executive vice president and chief marketing officer at Saks Fifth Avenue, where she oversaw its online business and marketing programs.
It is unclear whether CST intends to nominate the four directors to new three-year terms, nominate a new slate or possibly endorse the nominees unveiled by Engine. The company’s 2016 annual meeting of shareholders is slated for this spring.
Click here to read more about CST Brand’s recent struggle with shareholders.
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