Shareholders of J. Alexander’s voted down a proposed merger with Ninety Nine Restaurants, the company said on Thursday, essentially killing a deal, at least for now, that would have more than doubled the Nashville-based company’s size.
The company said that it “expects the merger agreement to be terminated” as a result of the vote.
Lonnie Stout, J. Alexander’s CEO, said that the company would focus on its organic growth strategies at its existing concepts, including J. Alexander’s, Redlands Grill and Stoney River Steakhouse.
“While we are disappointed that shareholders did not approve this transaction, we are confident in our overall strategy, our strong culture and our ability to deliver value to shareholders,” Stout said in a statement. “Looking forward, we remain focused on growing our business, strengthening our competitive position and enhancing our current restaurant concepts.”
The proposed merger with Ninety Nine had come under fire largely because it would have given controlling shares to Fidelity National Financial, a title insurer that bought J. Alexander’s in 2012 and spun the company off in 2015.
The deal was valued at $199 million. J. Alexander’s would have paid Fidelity, which owns Ninety Nine through American Blue Ribbon Holdings, $179 million worth of its stock. That would have given Fidelity more than half of J. Alexander’s shares.
An activist investor, Marathon Partners, has vehemently opposed the deal, saying that it would give up control of the company without enough of a premium on the company’s stock price. Marathon is expected to push J. Alexander’s to explore a full sale or other strategic alternatives.
The merger would have given J. Alexander’s a 106-unit casual-dining chain in Ninety Nine that has locations throughout New England, where the company’s existing brands don’t have restaurants. J. Alexander’s current chains operate 44 locations in the Midwest and the South.
Two proxy advisory firms, Institutional Shareholder Services and Glass Lewis, recommended against the deal. J. Alexander’s delayed a shareholder vote earlier this week.
“Disinterested shareholders” who were not affiliated with the company or Fidelity did not approved the merger. Their OK was required as part of the merger agreement.
J. Alexander’s said that average weekly sales at its flagship concept and Redlands Grill increased 2.3% in the company’s fourth quarter ended Dec. 31. Average weekly sales at Stoney River increased 7.3%, according to preliminary results the company released on Thursday.
J. Alexander’s revenues in the quarter rose 7% to $61.4 million.