Shareholders overwhelmingly handed a victory to an activist investor pushing for a sale of J. Alexander’s Holdings, but the true result of the proxy vote is anything but clear.
More than 60% of the company’s shareholders submitted “withhold” votes on two directors, Timothy Janszen and Ronald Maggard, according to preliminary results of the proxy released Wednesday.
The two had been targets of activist Ancora Advisors, which has been pushing for a sale of the Nashville-based casual-dining chain operator and saw the pair as having conflicts of interest stemming from a failed merger last year with Ninety Nine Restaurants.
The vote is nonbinding, but largely sends a message to the company and its board that shareholders agree with Ancora’s arguments that J. Alexander’s has underperformed.
“Shareholders have made their voices heard loud and clear, and now it is time for the board to immediately conduct a strategic review process, in which Ancora fully intends to participate, and sell the company to the highest bidder,” Ancora CEO Frederick DiSanto said in a statement.
J. Alexander’s, which had vigorously defended its two directors, said it was “disappointed” that Ancora’s campaign “diminished support” for its directors. The company also claimed partial victory in the approval of an equity incentive plan that was also on the proxy.
“The board has heard shareholders’ collective voice on the matters in connection with this meeting and intends to carefully consider the feedback received,” the company said in a statement. “As we look to the future, our foundation is solid, our operations are excellent and we have not wavered from our commitment to our long-term plan to deliver superior value.”
The comment didn’t sit well with DiSanto, who said it “shows how completely tone deaf the board and management are.”
“The company’s characterization that the basis for shareholders’ ‘diminished support’ of the incumbent directors was Ancora’s withhold campaign and not its own dubious governance practices and stock price underperformance is yet another prime example of how this board lacks accountability and just plain doesn’t get it,” DiSanto said.
The dispute stems from Ancora’s $11.75-per-share offer for J. Alexander’s, which operates 46 units. The company turned the offer down, saying it “dramatically undervalues the company.”
Ancora, however, pointed out that the company was willing to hand over control to its former owner, Fidelity National Financial, in the proposed merger with Ninety Nine Restaurants last year, at a value of $11 per share.
The investor said the board had conflicts of interest in that deal.
Janszen is CEO of Newport Global Advisors, which owns 30% of Ninety Nine Restaurants. Maggard had been on the board of a Fidelity subsidiary before resigning just before the merger was announced.
Ancora, which owns 9% of J. Alexander’s stock, later won key victories in its fight when proxy advisory firms agreed with its assessment that the company was in need of a message over its stock performance and corporate governance practices.