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J. Alexander’s rejects Ancora’s purchase offer

The board of directors said that the $11.75-per-share proposal “dramatically undervalues the company.”
Photograph: Shutterstock

J. Alexander’s board rejected an $11.75-per-share offer from one of its shareholders, arguing that the offer is an attempt to gain control of the company at an unreasonably low price.

In a letter to activist shareholder Ancora Advisors, the Nashville-based J. Alexander’s board said the offer “dramatically undervalues the company.”

“The board takes its fiduciary duties to all shareholders seriously and strongly believes that it would not be a prudent or appropriate exercise of those duties to sell the company at a price that significantly undervalues the company at a time when the business is performing well,” the company said in its letter.

The company’s board said it “unanimously believes Ancora’s purported proposal does not maximize value for all shareholders,” noting that the offer price was 12% lower than the company’s 52-week trading high and 22% lower than an equity analyst’s price target for J. Alexander’s.

“The entire board of directors, including a representative of the company’s largest shareholder, firmly believes that Ancora’s purported proposal is simply too unattractive to entertain,” the company wrote.

The letter came days after Ancora, one of J. Alexander’s largest shareholders, submitted a nonbinding, unsolicited offer that included some pointed criticisms of the company in its four years since being spun off from Fidelity National Financial.

It also came a day after another investor, Mario Gabelli, urged the company to hold an auction process—agreeing with many of Ancora’s points.

One of those points was the fact that J. Alexander’s is too small to be public and therefore has not generated strong enough returns to warrant remaining a public company. J. Alexander’s agreed with that assessment.

“The board believes that trading prices for the company’s stock do not reflect a full and fair market value and that your own acquisition of J. Alexander’s stock over the last two years is evidence if this,” the company said.

The company also defended its proposed merger with 99 Restaurants, which shareholders defeated last year, saying that it “was an opportunity to diversify our business and increase cash flow.”

“The facts relating to the 99 transaction are well documented, fully disclosed and are now over a year in the rearview mirror,” the company said.

J. Alexander’s also said that it has terminated a deal with Black Knight Management Consulting, a deal that Ancora criticized as costly and full of conflicts of interest, such as ownership by various officers of Fidelity and J. Alexander’s executive chairman, Lonnie Stout.

J. Alexander’s has terminated that deal, thus eliminating the advisory fees.

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