NEW YORK, Jan. 19, 2018 /PRNewswire/ -- Marathon
Partners Equity Management, LLC, a New
York-based investment firm, and its affiliated investment
funds (collectively "Marathon Partners"), which beneficially own
approximately 6.3% of the common stock of J. Alexander's Holdings,
Inc. ("J. Alexander's" or, the "Company") (NYSE: JAX), issued the
following statement today in response to leading independent proxy
advisory firm Institutional Shareholder Services Inc.'s ("ISS")
recommendation that J. Alexander's shareholders vote against the
Company's proposed acquisition of 99 Restaurants, LLC ("99
Restaurants"). A special meeting of shareholders to vote on the
proposed merger is scheduled to be held January 30, 2018.
Mario Cibelli, managing member of
Marathon Partners, issued the following statement:
"We are deeply gratified that ISS agrees with us that J.
Alexander's misguided acquisition of 99 Restaurants is not in the
best interests of the Company or its shareholders and should be
voted down at the upcoming Special Meeting of Shareholders on
January 30th. Like
Marathon Partners, ISS is not satisfied that J.
Alexander's chose to proceed with a conflicted, related
party transaction without having first explored all strategic
alternatives to maximize value for its shareholders. ISS
further recognizes that the market reaction to the proposed merger
has been sharply negative as reflected by J. Alexander's share
price, clearly illustrating shareholders' opposition to becoming
minority shareholders of a controlled, small-cap company. The ISS
report further reinforces our deep concerns that the J. Alexander's
Board of Directors was not looking out for our best interests
as shareholders in negotiating the merger with 99 Restaurants.
We will be following ISS's independent recommendation by
voting against this acquisition to ensure that we, and
other holders of the Company's shares, receive the value we
deserve for our investment. In the event that
this poorly structured deal is rejected, we plan to urge
a review of all strategic alternatives to maximize value."
Mr. Cibelli continued:
"In addition, we are disappointed that management has
disingenuously left out key metrics in its recent disclosure to
investors regarding 99 Restaurants' same store sales, profitability
and margins, and J. Alexander's preliminary financial results for
the fourth quarter of 2017. Shareholders deserve to know how
the business performed versus 99 Restaurants as they consider a
transaction that would significantly dilute their ownership in the
Company. Full disclosure of J. Alexander's results,
will allow shareholders to make an informed decision on
whether independence is a better path forward."
Key Excerpts from the ISS Report Recommending that J.
Alexander's Shareholders Vote Against the Proposed Merger with 99
Restaurants:
- "The board does not appear to have thoroughly explored other
alternatives, which is particularly concerning given the related
party nature of the transaction and the tenuous strategic rationale
for the proposed combination. Moreover, market reaction has been
sharply negative, implying limited downside risk of non-approval.
Voting to oppose the merger is shareholders' last chance to avoid
becoming minority shareholders of a controlled, small cap company.
Given these factors, a vote AGAINST this item is
warranted."
- "Other alternatives that the board could have examined
include accelerating JAX's unit growth, changing its capital
structure, or selling JAX outright. The proxy does not indicate
that the board thoroughly pursued any of these options. JAX
shareholders likely would have preferred to see the board fully
investigate all strategic alternatives, before agreeing to a merger
which will result in them becoming minority owners of a controlled
company."
- "As the proxy discloses, each of JAX's six directors, at the
time of negotiations and the transaction, had conflicts as either
executives or board members of FNF, FNH, or FNFV. JAX's board noted
such conflicts when the full board began exploring the purchase of
99 Restaurants. However, the board did not form a special
committee, instead appointing Chairman Frank Martire and CEO Lonnie Stout, II, to represent JAX while
negotiating a transaction. Nor did any JAX directors resign from
their roles at FNF, FNH, or FNFV while negotiations were occurring;
it was only on the day after the agreement was signed that Martire
and fellow director Ronald Maggard,
Sr., resigned from FNH's board. Given JAX's directors'
longstanding ties, fiduciary obligations, and economic interests
tied to 99 Restaurants, Marathon's skepticism as to whether JAX's
directors were looking out for JAX shareholders' best interests
appears to be a reasonable concern."
- "There does not appear to be a solid strategic fit between
JAX and 99 Restaurants. There is no geographic overlap, with 99
Restaurants in New York State and
New England, while JAX is mainly in the Midwest and South (though
it extends into Pennsylvania).
Furthermore, their target audience appears vastly different. In
2016, JAX's J. Alexander restaurants had an average check per
customer of $30.41, while its
Stoney River restaurants had an
average check per customer of $44.13,
both vastly higher than 99 Restaurants' average check per customer
of $15.85."
- "These geographic and customer differences limit true
operational synergies, which JAX forecasts at between $1.5 to $2.0
million annually; the high end of that would be
approximately 0.7 percent of 99 Restaurants' revenue and 7 percent
of its EBITDA (both for the LTM ending June
30, 2017). These synergies, as percentages, are far smaller
than synergies expected from another recent merger between two
restaurant companies."
- "There doesn't appear to be anything concrete, such as
service or cost initiatives, or an upgraded menu, which will lead
to…improving [operating] margins. In fact, 99 Restaurants' results
likely already have benefited from improved appearance, as 88 of
106 restaurants will have been remodeled between 2013 and the end
of 2017, with 102 locations complete to the current brand design
standards."
- "…[I]nvestors may be concerned about becoming minority
shareholders in a publicly traded, yet controlled company. They may
believe, as Marathon does, that such a role depresses liquidity and
valuations, relative to non-controlled companies of a similar size.
Investors may also wonder whether their reduced input regarding
corporate decisions could allow the combined company to undertake
questionable acquisitions, possibly of restaurant chains in which
FNF, its officers, or its directors have ownership
interests."
- Equity investors have reacted negatively to the merger. Over
the 12 months ending on Jan. 12,
2018, JAX's average trading daily volume was 34,070 shares,
according to Bloomberg Finance. In the past year, the heaviest
trading day (at 4.5x average daily volume) was the day the merger
was announced, with JAX's stock falling 5.0 percent. The day that
Marathon publicly announced its opposition to the deal, JAX's stock
rose 7.8 percent on 3.7x average daily volume.
*Marathon Partners has neither sought nor obtained consent
from ISS to use previously published information in this press
release.
Marathon Partners is being advised by Olshan Frome Wolosky LLP
in connection with its investment in J. Alexander's and its
opposition to the Company's acquisition of 99 Restaurants.
About Marathon Partners
Marathon Partners Equity
Management, LLC is a fundamental, research intensive
investment firm that deploys capital with a long-term investment
horizon.
Investor Contact
Mario
Cibelli
(212) 490-0399
http://www.marathonpartners.com
WARNING REGARDING FORWARD LOOKING STATEMENTS
THIS
PRESS RELEASE CONTAINS FORWARD LOOKING STATEMENTS. FORWARD LOOKING
STATEMENTS CAN BE IDENTIFIED BY USE OF WORDS SUCH AS "OUTLOOK",
"BELIEVE", "INTEND", "EXPECT", "POTENTIAL", "WILL", "MAY",
"SHOULD", "ESTIMATE", "ANTICIPATE", AND DERIVATIVES OR NEGATIVES OF
SUCH WORDS OR SIMILAR WORDS. FORWARD LOOKING STATEMENTS IN THIS
PRESS RELEASE ARE BASED UPON PRESENT BELIEFS OR EXPECTATIONS.
HOWEVER, FORWARD LOOKING STATEMENTS AND THEIR IMPLICATIONS ARE NOT
GUARANTEED TO OCCUR AND MAY NOT OCCUR AS A RESULT OF VARIOUS RISKS,
REASONS AND UNCERTAINTIES. EXCEPT AS REQUIRED BY LAW, MARATHON
PARTNERS EQUITY MANAGEMENT, LLC AND ITS AFFILIATES AND RELATED
PERSONS UNDERTAKE NO OBLIGATION TO UPDATE ANY FORWARD LOOKING
STATEMENT, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE
DEVELOPMENTS OR OTHERWISE.
View original
content:http://www.prnewswire.com/news-releases/marathon-partners-comments-on-iss-recommendation-against-j-alexanders-proposed-acquisition-of-99-restaurants-300585242.html
SOURCE Marathon Partners Equity Management, LLC