One of three activist investors looking to overhaul Bed Bath & Beyond’s board of directors and top executive filed a complaint against the company Friday in the United States District Court, Southern District of New York.
In the complaint, Legion Partners Holdings alleges that Bed Bath has made efforts to subvert the rights of shareholders in relation to the slate of director candidates that Legion nominated for its board at the 2019 annual meeting of shareholders, which has been reduced from 16 nominees to 10.
“In order to avoid triggering potential adverse financial consequences under Bed Bath’s $1.5 billion notes if a majority of our nominees were to be elected at the 2019 annual meeting, the board can take the simple step of approving our nominees,” the investor group said in a statement. ”Rather than doing this in a timely fashion – in order to ensure a free and fair election without the threat of such potential consequences – the board has instead sought to put up unnecessary obstacles, leaving us no choice but to file a legal complaint against the company.”
A change of control of the majority of the board followed by a rating downgrade would cause $1.5 billion in debt to be due immediately at 101-percent, plus accrued interest.
Bed Bath & Beyond responded saying that the company never said it wouldn’t approve the nominees once they were named, but “rather stated that the board was considering the request and would act in a manner consistent with the company’s obligations” and that it has asked the investor group to allow the board to interview their candidates.
In a letter to Elizabeth Gonzalez-Sussman, counsel for the investor group, Bed Bath counsel Trevor Norwitz wrote, “If your clients are not willing to allow their nominees to be interviewed, we request that they agree to indemnify the company and the board against any risks and costs resulting from the requested approval.”