Cabela’s Stays Silent in Wake of Activist Investor's Stake

Prosek on Cabela's Activist Investors StakeMum’s the word at Cabela’s — at least publicly — after an investor took a large stake in the Nebraska-based retailer and said it would press for big changes.

The company hasn’t made any public statements since Elliott Management Corp., a New York investor, announced Wednesday morning it had amassed an 11 percent interest in the company.

One consultant who helps companies and investors with such situations said the silence was “unusual.”

Damien Park, partner at Philadelphia-based consulting firm Hedge Fund Solutions, said the lack of response — even a simple acknowledgment of the news — is uncommon in today’s world of activist investors.

There’s usually some response “because the world is looking for something. All the shareholders are looking for ‘What’s this mean? What are you guys going to do about it?’ ” Park said.

If Cabela’s doesn’t speak up soon, he said, it could signal a fight is brewing, with both sides gearing up to battle it out for the votes of shareholders.

Activist investors take large stakes in public companies and press for changes to juice a company’s stock price. Other large investors often vote with the activists — which magnifies the influence of the activist.

But, it’s important to note, it’s still early in the game. The silence could also be a sign that neither side is interested in public mudslinging, investor-watchers said.

The company didn’t respond to repeated phone messages and emails Wednesday and Thursday. A spokesman for Elliott wouldn’t comment.

Cabela’s silence contrasts with another Midlands company recently targeted by an activist investor.

ConAgra Foods responded almost immediately in June to the news that investor Jana Partners had amassed more than 7 percent of the company’s stock.

The Omaha-based food company said at the time it was “committed to acting in the best interests of all shareholders” and welcomed shareholder engagement right after Jana disclosed its stake.

Jana called for big changes at ConAgra, and the changes soon came. ConAgra this summer announced the sale of one of its three main units, and earlier this month said it would cut 1,000 jobs in Omaha and move its headquarters and 300 other jobs to Chicago.

That’s the same response many companies have when an activist investor announces itself, Park said.

One reason Cabela’s could be keeping mum is because the Cabela family owns at least 24 percent of the company, as of April. The family might feel that with such a large stake, Elliott isn’t a threat, Park said, noting he didn’t have any ties to the situation.

Elliott said Wednesday in a government filing that it had begun purchasing Cabela’s stock in late August and had amassed an 11.1 percent stake in the company.

The company said that Cabela’s shares are “significantly undervalued” and that it would “unlock” the value by possibly selling the company as a whole, putting the company’s real estate up for sale or spinning off its valuable credit card business.

Cabela’s stock shot up nearly 18 percent after the announcement. It gave up some of those gains Thursday, falling about 0.5 percent on the day. Ahead of Wednesday’s announcement, the stock had fallen about 37 percent on the year.

The stock’s poor performance is one of the reasons an activist investor was attracted to Cabela’s, stock analysts say.

Some Wall Street types say it’s too early to read into Cabela’s silence. Cabela’s might just be waiting to get more information about what Elliott wants before responding, said Andy Merrill, a partner at Prosek Partners, a consulting firm in New York that works with companies on their strategies to communicate with shareholders and deal with crises.

As activist investing has become more mainstream, the practice has evolved, he said. It used to be that an activist would take a large stake in a company and fire off angry letters in public, putting pressure on the company to bend to its will. Now, Merrill said, there are more behind-closed-doors negotiations.

“These contested situations are expensive because you’ve got to get an army of advisers on both sides and they’re distracting from the ongoing operations of the company,” Merrill said. “More and more what you’re seeing these days is these are settled out of the spotlight, with management and the activists meeting in between.”

Nathan Yates, a stock analyst with Forward View Consulting in Virginia who follows the company, said it’s unlikely the retailer, which sells camping, hunting and fishing gear, was shocked by the news of an activist taking a stake.

He doesn’t think the public silence is a sign of a coming battle.

“Right now I’d say that discussions are ongoing” between Cabela’s, the activist and possibly other investors, he said.

So far, those discussions are behind closed doors.