Exclusive: Chipotle, Ackman talks intensify with confidentiality agreement

Fri Nov 4, 2016 5:02pm EDT
 
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By Svea Herbst-Bayliss and Lisa Baertlein

BOSTON/LOS ANGELES(Reuters) - Billionaire investor William Ackman and Chipotle Mexican Grill (CMG.N: Quote) have signed an agreement to engage in confidential discussions, a source familiar with the matter said, in a sign that the activist may be able to force change at the burrito chain without a costly and drawn-out proxy contest.

Ackman, who took a nearly 10 percent stake in the beleaguered fast casual food chain two months ago and has not disclosed his strategy, wants multiple board seats with the aim of beefing up food safety and marketing, three people familiar with the matter said this week.

Chipotle declined to comment on discussions with specific shareholders, but said it was committed to dialogue with investors including its largest shareholders and that it has been "actively working on board refreshment."

A spokesman for Ackman's firm, Pershing Square Capital Management, declined to comment.

The signing of the confidentiality agreement does not guarantee that a deal can be reached or is near, but it is a sign of a potential negotiated settlement between a board that has defended its founder-led management and an activist known for public, acrimonious fights.

Chipotle shares have dropped 40 percent since a series of food borne illness outbreaks were linked to the chain in late 2015 and led to temporary restaurant closures across the United States. Sales have yet to recover to levels seen before the food safety incidents jolted confidence in the formerly top-performing restaurant operator.

Chipotle recently hired a top Wall Street law firm, investment banks and a public relations shop to help defend itself against the hedge fund billionaire, sources familiar with the matter told Reuters.

The company's board has long been under fire from pension funds and other shareholders for being too insular, for the level of executive compensation, and for a handful of members having served more than 15 years.   Continued...

 
William Ackerman, CEO and Portfolio Manager of Pershing Square Management, is pictured during the Harbor Investment Conference in New York, U.S. on February 13, 2013. REUTERS/Shannon Stapleton/File Photo