ATLANTA, July 5, 2012 /PRNewswire/ -- Privet Fund LP ("Privet"), member of The Committee to Strengthen J. Alexander's (the "Committee"), a group that collectively holds over 10% of the common stock of J. Alexander's Corporation ("J. Alexander's" or the "Company") (NASDAQ: JAX) announced today that it has issued an open letter to shareholders of the Company outlining the reasons Privet believes the proposed transaction is not in the best interests of J. Alexander's shareholders. In response to the Company's violation of Tennessee law, Privet further states that it has filed a complaint in Tennessee Court seeking to compel the Company to hold its 2012 annual meeting of shareholders. Privet has also given the Company formal notice of its intent to call a special meeting of stockholders in order to add two directors to the Company's Board in the event that the annual meeting is not held within 90 days.
The full text of Privet's letter is shown below:
July 5, 2012
Dear Fellow J. Alexander's Shareholders:As you are likely aware, on June 22, 2012, J. Alexander's Corporation entered into an agreement to merge our Company with a subsidiary of Fidelity National Financial. In light of this, we are reaching out directly to you, the true owners of the Company, to clarify our view of the situation and provide an update of the measures we are taking to continue to protect and maximize value for all J. Alexander's shareholders. Last week we sent a letter to E. Townes Duncan, Joseph Steakley and Brenda Rector, the independent members of the Company's Board, expressing our dissatisfaction with the proposed merger. Our disappointment extends beyond the contemplated economic value for shareholders. We do not trust that this process was conducted with the best interests of the Company's shareholders in mind. We do not believe this transaction is a satisfactory outcome for shareholders. We will not consent to part with our stake unless we are paid a full and fair value. As we have maintained since commencing our efforts to achieve representation for shareholders, we believe in the long-term prospects of J. Alexander's. We feel it is grossly inequitable to the Company's owners for the Board to consummate a transaction simply because they deem it the "best" of the limited offers received through a process rife with potential conflicts. We believe there are several questions that shareholders should demand to have answered before they consent to leave significant value on the table:
- Why are management and the Board suddenly in such a hurry to sell the Company right now? A mere 15 months ago the CEO's publicly stated exit strategy was the "Columbarium at the First Presbyterian Church in Nashville".(1) With ten consecutive quarters of same-store sales growth, would not an offer need to justly compensate shareholders for the Company's growth prospects in order to precipitate such a drastic departure from management's historical strategy?
- Why was O'Charley's (a restaurant company operating in a stagnant niche of casual dining, having just sold a large portion of its owned real estate and generating approximately half of the EBITDA margins that we estimate J. Alexander's will produce this year) able to obtain the same 6.5x multiple of current year EBITDA in an all-cash(2) transaction from Fidelity National just a few months ago?
- Why is the Board satisfied that Fidelity will not pay more than 6.5x current year EBITDA (currently in cash and stock) when, in its very own investor presentation, Fidelity touts all of the synergies it can extract from restaurant companies and asks its investors to value those sub-par brands at 8x current year EBITDA?
- Why does the Board think shareholders should accept a security with no prior market price discovery, representing minority ownership in an accumulation of businesses that have minimal overlap with the Company's growing market niche and superior brand reputation, while all of the options belonging to insiders will be cashed- out in full?
- Perhaps most relevant, did the other indications of interest offer similar terms of employment and/or compensation to the current management team? What role did this play in the Board deeming those offers to be "inferior"?