Investment Firm Takes Aim at CST’s Board of Directors

HOUSTON — JCP Investment Management LLC announced it will nominate “highly qualified” board of director candidates at CST Brands Inc.’s 2016 annual meeting of stockholders. The meeting date has yet to be set, but is likely to be in early June, as San Antonio-based CST held both its 2014 and 2015 annual meetings on June 4 of each respective year.

JCP owns approximately 1 million outstanding shares of CST, parent company to Corner Store convenience stores. As CSNews Online previously reported, JCP wrote a letter to CST’s board of directors on Dec. 22, recommending CST put itself up for sale.

In a statement released Wednesday, JCP stated it “remains disappointed by CST's lack of progress on its operational initiatives, both recently and since being spun out from Valero Energy Corp. nearly three years ago, but continues to believe there is tremendous value and opportunity to be realized in the company.”

The Houston-based investment firm believes new, independent directors can provide a fresh perspective. JCP said it has “identified potential director nominees with direct and relevant experience in the convenience store industry, including individuals with a broad range of retail and restaurant company experience, who have strong ties to Texas where most of CST’s business occurs.” 

JCP did not reveal the names of any of these potential new board of director candidates.

The investment firm did note that it “looks forward to a constructive engagement” with CST’s board of directors. However, if “no agreement can be reached, JCP intends to formally nominate and pursue the election of its nominees to the board and more fully engage with CST’s shareholders regarding its plans for the company.”

JCP is not the only investor to express concern in CST’s operations. Engine Capital LP, which owns approximately 1 percent of CST’s outstanding shares, also issued a letter to CST’s board of directors expressing similar concerns.

CST has not issued an official press release to respond to JCP’s previous statements. However, CST Chairman, President and CEO Kim Lubel issued a memo to the company’s employees on Dec. 11. “You may have heard or read recent rumors regarding our company. This is something many publicly traded companies face. And, like most public companies, it is our long-standing policy not to comment on rumors or speculation. Don’t let market rumors distract you," Lubel said in her memo.

“We were … reminded ... that, as a public company, our shareholders depend on us every day to create value by superior execution,” Lubel continued. “We have to continue to push harder than ever to be industry leaders.”

This is not JCP’s first involvement in the c-store industry. The firm previously took aim at The Pantry Inc., garnering seats on its board of directors. The parent of Kangaroo Express later sold itself to Alimentation Couche-Tard Inc. for approximately $1.8 billion.

Couche-Tard, Marathon Petroleum Corp.’s Speedway LLC division, and Sunoco LP have been named as companies who would possibly be interested in acquiring CST were it put up for sale.

As of midday trading on Wednesday, CST’s market capitalization was approximately $2.5 billion. The Pantry sold at a 27-percent premium to its market value, as calculated the day prior to reports it was putting itself up for sale. If a similar valuation were given to a sale of CST, its final sale price would be expected to be well over $3 billion.