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Activists Fill Pantry with Full Proxy Slate

The proxy fight has been nothing if not acrimonious. The activists have released letters bemoaning Pantry's underperformance compared to its competitors, while the company has defended its strategy saying, "It appears that they [the funds] are engaging in this proxy contest for the self-serving goal of gaining publicity for themselves and their newly formed hedge funds."

When the activist campaign launched, "All of these people [came] out of the woodwork," Eberwein said. "One guy who interviewed to be CEO said he so disliked the chairman that he didn't take the job."

Pantry has had four CEOs in the past five years.

The activists chose which incumbent directors they would pit their nominees against. Their prime target was the chairman of the board, whom they succeeded in ousting. "It's like in politics, when you take out the speaker of the house," Eberwein said.

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Two of the activists' primary goals are convincing Pantry to install more quick-service restaurants in its convenience stores, a strategy that has been successful for its competitors, and paying down debt.

Pantry has high leverage compared to its competitors. Its debt-to-equity ratio stands at 292.2%, while convenience store operator Susser Holdings' (SUSS) ratio is 90.5% and Casey's General Stores' (CASY - Get Report) is 120.9%, according to Bloomberg data.

When the activists brought up the possibility of creating a REIT to Pantry's management in December, "The CFO [Clyde Preslar] said: 'That's an interesting idea, I hadn't thought of that before. Maybe we'll look at that someday,' " Eberwein recounted.

But, the investor said, "The time to look at [the REIT option] is now."

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