A team of hedge funds who want to take control of Bed Bath & Beyond’s board went public last week with a 168-page manifesto that accused the retailer of, among other things, “excessive compensation” and self-dealing.
The hedge funds — Legion Partners, Macellum Capital and Ancora Partners — said Bed Bath & Beyond’s founders have enriched themselves through the company, including the family of co-founders Leonard Feinstein and Warren Eisenberg.
The funds referred to Bed Bath & Beyond’s $67 million purchase of the Buy Buy Baby chain in March 2007, which was reportedly founded by Feinstein’s two sons. More, they claimed that part of the $67 million purchase was a $19 million debt repayment, which left roughly $86 million in the sons’ pockets.
In addition, they took aim at the chain’s $1 million acquisition of Chef Central in 2017, referring to it as a “failed retailer” that had been founded by the son of Eisenberg.
“It’s not just family members who got rich off Bed Bath & Beyond, the hedge funds claimed,” reported the New York Post. “Between 2003 and 2017, the founders paid themselves and Bed Bath & Beyond Chief Executive Steven Temares $313 million — even as the company’s market cap fell by $8 billion, they said. Pay for founders Eisenberg and Feinstein has included “excessive perks,” including $229,850 for car services in 2017 and $63,700 for their tax planning needs, the hedge funds said.”
On April 26, Bed Bath & Beyond Inc. released a statement in response to the presentation. It said, in part, that the company is “executing on a comprehensive multi-year transformation plan to strengthen its position as the expert for the home and heart-felt life events. The plan is well underway and delivering results. The Company’s Board of Directors and management are open to value enhancing ideas from all shareholders, and will carefully review the merits of the Activist Group’s presentation for opportunities to incorporate their feedback into its plan.”
Bed Bath & Beyond, the statement continues, “always welcomes investor input toward the goal of driving shareholder value and returns. In fact, many of the transformational changes underway are a result of shareholder input throughout the last couple of years. While we have been and continue to be open to engaging with the Activist Group, we note that the Activist Group has steadfastly declined to engage in a constructive dialogue with the Company, and instead, has chosen only to release its perspectives in a public forum.
“Earlier this week, in response to shareholder feedback and in connection with its commitment to accelerating refreshment at the Board-level, the Company announced the transformation of its Board of Directors and additional governance enhancements. With these changes, the Board will comprise 10 directors, nine of whom are independent and eight of whom have been appointed in the last two years. The Company offered the Activist Group the opportunity to participate collaboratively in this Board and governance transformation, but the Activist Group declined.”
