Activist investor wants to take over J. Alexander's for $186M
UPDATE, April 12, 2019: J. Alexander's board of directors rejected Ancora's proposal in a letter saying that the investor is trying to acquire control of the company at a bargain price. The board called the offer "unattractive to entertain" and that considering it would be inconsistent with the company's fiduciary duties to its shareholders.
- Activist investor Ancora Advisors has launched a takeover bid for contemporary wood-fired cuisine restaurant J. Alexander's, according to CNBC.
- With 1.3 million shares already in Ancora's pocket, it offered to buy the Nashville chain for $186 million.
- Ancora believes J. Alexander's wound up in distress after returning to public markets in September 2015. The activist investor also claims that when it agreed to a spinoff deal with Fidelity National Financial, which included the hiring of a management consulting firm, this led to reduced value for shareholders. The investor is also critical of August 2017 efforts to merge with Fidelity National Financials' Ninety Nine Restaurants due to several conflicts of interest with board members being on both sides of transaction.
Activist Investors may launch heavy criticisms at restaurant groups over their alleged mismanagement of casual chains like J. Alexander's, but these agents of change aren't inherently bad. The restaurant space is more competitive than ever with new trends like food delivery, e-commerce, home-delivered meal kits and rapidly changing consumer preferences making it harder and harder to bring home meaningful margins.
These entities have been putting serious pressure on the casual dining space. There are plenty of success stories, too, like hedge fund Starboard Value's takeover of Darden Restaurants around 2014, which led to a 29% boost in the company's stock price, cutting about $100 million costs from operations and remodeling its restaurants to achieve a more modern look. Last month, Cracker Barrel's biggest shareholder, Saradar Biglari, fired a shot at CEO Sandra B. Cochran, asking her to sell its Holler and Dash Biscuit House fast casual concept and arguing that the banner was an "ill-conceived project destined to fail."
In December pressure from activist investor Engaged Capital, which has snagged about 10% of Del Frisco's Restaurant Group shares, led to the company to consider a sale and other strategies to increase shareholder value.
With $6.5 billion in assets under management, Ancora is in the business of targeting undervalued companies and agitating for change with the hopes of shaking out shareholder value. They've employed tactics like replacing management and board members as well as spinoffs and proposed mergers in the past.
But J. Alexander's refusal to consider the offer could put pressure on Ancora to deploy new tactics or it could very well back off depending on how effective the board's letter was to satisfy the investor's concerns. The investor's next move could be an interesting one to watch.