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Snubbed investor steps up its fight against J. Alexander’s

Ancora Advisors, which made an offer to buy the company in April, is urging shareholders to vote against board members, kicking off a proxy fight.
Photograph: Shutterstock

After getting snubbed in its effort to buy J. Alexander’s, investor Ancora Advisors is taking its case to shareholders.

The firm, which owns nearly 9% of the Nashville-based casual-dining company’s shares, is recommending shareholders withhold their votes from directors Timothy Janszen and Ronald Maggard.

The vote would “send a clear message to the J. Alexander’s board that the status quo is unacceptable,” the investor said in a release.

Ancora offered to buy the 46-unit operator for $11.75 per share back in April, saying that the company had failed to offer any strategy to increase shareholder value.

J. Alexander’s board rejected the offer, saying that the proposal “dramatically undervalues the company.”

In a letter to the J. Alexander’s board, Ancora CEO Fred DiSanto chided directors for refusing to discuss the offer.

“At the very least, we would have expected the [J. Alexander’s] board to engage with us on our proposal or announce that it would conduct a strategic alternatives review,” DiSanto said. He noted that another large shareholder, Marathon Partners, quickly urged the board to conduct a sale process to seek out the highest bidder.

“The board rejected our proposal out of hand and, since that time, has made it very clear that it is intent on continuing the same failed business strategy that has destroyed shareholder value” since a 2015 spinoff from Fidelity National Financial, DiSanto wrote.

Stock in J. Alexander’s, which operates Stoney River Steakhouse and Redlands Grill in addition to its flagship chain, is up 31% this year, even after retreating somewhat since the company rejected the Ancora offer. The company’s stock has hovered mostly between $10 and $12 since the spinoff from Fidelity.

Ancora reiterated its offer to buy J. Alexander’s after the initial rejection, when it said that it would run a proxy campaign if the company’s board didn’t explore a sale process.

The investor, both in its offer and its proxy fight, is citing a proposed merger with Ninety Nine Restaurants, which would have more than doubled J. Alexander’s size but would have handed control of the full company back to Fidelity—Ninety Nine Restaurants’ controlling shareholder. The value of that control would have been $11 a share.

J. Alexander’s shareholders rejected that deal. But Ancora and Marathon have been critical of what they see to be considerable conflicts of interests on the J. Alexander’s board in relation to the Ninety Nine Restaurants’ deal.

DiSanto in his letter said that Janszen’s private-equity fund would have received $54.3 million in new equity from that Ninety Nine Restaurants deal. Janszen is the CEO of Newport Global Advisors, which owns 30% of Ninety Nine Restaurants.

DiSanto also cited a conflict of interest from Maggard, who had been on the board of Fidelity Newport Holdings, the controlling shareholder of Ninety Nine Restaurants and a subsidiary of Fidelity National Financial. Maggard resigned from that board the day the proposed merger was announced in 2017.

“Considering the board’s extensive conflicts, it is impossible to see an angle where the decision to engage that transaction was made other than to enrich and entrench the current board members,” DiSanto wrote.

In so doing, Ancora is making the upcoming shareholder vote an effective referendum on a deal that shareholders rejected a year ago.

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