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Ingles adds investor nominee to board slate

Company supports Gamco’s Lowden as new director

Ingles Markets has agreed to support the election of a director who had been nominated by one of its longtime investors, according to a filing this week with the Securities and Exchange Commission.

The Asheville, N.C.-based chain said in its proxy filing ahead of next month’s annual meeting that it is recommending a vote for John R. “Jack” Lowden as a new director. Lowden was among two director nominees proposed last October by Rye, N.Y.-based Gamco Investors, which has long held a stake in the regional retailer.

In the proxy filing, Ingles said the company and Gamco subsequently agreed that Lowden would be nominated. Lowden, 60, is president and chief investment officer of NewCastle Partners, a private investment firm that acquires manufacturing and specialty distribution businesses.

Mario Gabelli, the founder of Gamco, said his firm has been seeking to make Ingles more transparent and improve communications with analysts and investors. Ingles in recent quarters has not held conference calls to discuss its earnings results.

“We were a little frustrated that our analysts were not able to get fundamental information that all companies are willing to share,” he told Supermarket News on Tuesday.

Gabelli said he is supportive of the company’s direction and its management, however.

“I told [Ingles Chairman Robert P. Ingle II], ‘We’re not looking to have you do anything differently, but just realize that you have institutional shareholders who are responsible as fiduciaries to their clients,’” he said.

Gabelli declined to be specific about what changes might be forthcoming at Ingles, but he said he believes that “common sense prevailed.”

“Right now everyone one is on the same wagon, and going in the same direction,” he said.

The other director nominated by Gamco, Justyn R. Putnam, was not listed on the proxy ballot that Ingles filed on Monday.

In a filing last year, Gamco, which at the time owned 16.5% of Ingles Class A shares, said Ingles’ board lacked independence from the family that controls the company. Only three of the eight board members are independent, according to Gamco.

“We believe that the company is in urgent need of independent stockholder representatives on the board in light of the Ingle family’s controlling ownership and the lack of independent directors on the board,” Gamco said in the filing. “We believe these factors have resulted in poor corporate governance practices and a lack of transparency for all stockholders.”

Gamco noted in the filing that Ingles had not held a live conference call with analysts or investors since May of 2016.

“We believe that the board should encourage management to engage with stockholders to highlight successes, address concerns and provide stockholders, investors and analysts with the opportunity to ask fundamental financial questions regarding the company,” Gamco said.

In addition, Gamco said in the filing, it was concerned about shareholders not having a voice in the ratification of the company’s auditor, and also about the fact that the company’s chief financial officer, Ron Freeman, is a director.

All eight director positions are up for election at the annual meeting, which is scheduled for April 24. Two of the eight directors will be elected by Class A shareholders, and the remaining six directors will be elected by Class B shareholders.

Lowden would be one of two directors to be voted on by holders of Class A shares. The other Class A director is Ernest E. Ferguson, a retired senior VP at Wachovia Bank.

Brenda S. Tudor, a former Ingles executive who is now president and CFO of Morgan-Keefe Builders and last year was elected as a director by Class A shareholders, this year will stand for election by Class B shareholders. L. Keith Collins, president of milk processor Milkco, who had been a director since 2011, was elected by Class B shareholders last year and is not on this year’s ballot.

The remaining Class B directors are Freeman, Fred D. Ayers, Robert P. Ingle II, James W. Lanning and Laura Ingle Sharp.

Ingles operates about 200 supermarkets in six Southeastern states, and has long been seen as a steady regional operator that has withstood the challenges of Walmart and other competitors.

In a note last year, Mickey Chadha, an analyst with Moody’s Investors Service, said Ingles has a strong regional position in its markets.

“Ingles has been able to post same-store sales increases and compete successfully as the chain’s locations and the strength of its perishable product offerings give it the opportunity to be a destination for shoppers focused on fresh produce,” he said.

In the recently ended fiscal first quarter, Ingles posted net income of $45.1 million on sales of just over $1 billion, with comparable-store sales gains of 2.2%, excluding gasoline.

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