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Activists Fill Pantry with Full Proxy Slate

Eberwein said he believes that reducing the company's debt load would improve its valuation, but he's not dead set on one strategy. "There are lots of ways to do it," he said, adding that a REIT deal would be one way to raise money for debt repayment.

Although multiple existing REITs have contacted him about sale-leaseback deals, including one REIT with a market cap in the $4 billion range, Eberwein wondered whether Pantry would get the most value from going solo.

"If we have four or five REITs calling us up and saying please, please, please do a deal with us - they're not running a charity," he said, adding, "This is the option I'm most intrigued by: creating our own REIT."

Pantry could create a REIT containing some of its real estate through sale-leasebacks, and monetize that entity through an initial public offering. One example of a similar convenience store REIT model is Getty Realty (GTY).

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During the activist road show, some investors questioned whether Pantry was big enough do its own REIT and wondered how much work it would take to renegotiate real estate contracts.

Eberwein acknowledged that it would be a lot of work to determine whether Pantry has the size and diversification to create a REIT, to decide which locations it would want to include and to renegotiate contracts, but he also said he thought those questions were worth asking.

Another option would be creating an MLP for Pantry's fuel servicing assets, as convenience store operator Susser Holding Corp. has done.

Lone Star and JCP took legal advice on the proxy fight from Steve Wolosky of Olshan Frome Wolosky. Pantry was advised by Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan.

Pantry did not respond to requests for comment. JCP Investment could not be reached for comment.

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