Howard Jonas Consortium Strongly Encourages LL Flooring Holdings to Engage in Sale Process With $5.76 Per Share as Floor Bid
13 Juni 2023 - 10:56PM
Howard Jonas, leading a consortium of investors that maintains an
economic interest in more than 5% of the outstanding shares of
common stock of LL Flooring Holdings, Inc. (NYSE: LL), today sent a
letter to LL Flooring’s Board of Directors strongly encouraging the
Board to seriously consider the offer made on May 26, 2023 by F9
Investments, LLC and Cabinets to Go, LLC to acquire the company at
a price of $5.76 per share as a fair starting point for acquisition
discussions. Mr. Jonas urged the Company to constructively engage
with the F9 Group and to advance an immediate sale process. The
full text of the letter that was sent to LL Flooring’s Board of
Directors on June 13, 2023 follows below:
June 13, 2023
Nancy M. TaylorChairperson of the Board of
Directors
Charles Tyson Chief Executive Officer
LL Flooring Holdings, Inc.4901 Bakers Mill
LaneRichmond, Virginia 23230
Dear Ms. Taylor and Mr. Tyson:
I am writing on behalf of an investment
consortium that I lead to strongly encourage the Board of Directors
of LL Flooring Holdings, Inc. to seriously consider the offer made
on May 26, 2023 by F9 Investments, LLC and Cabinets to Go, LLC
(collectively, the “F9 Group”) to acquire the company. The
consortium maintains an economic interest in more than 5% of the
outstanding shares of common stock of LL Flooring through a
combination of direct holdings and swaps.
We believe the F9 Group’s offer of $5.76 per
share is a fair starting point for acquisition discussions and that
the Board should engage with the F9 Group and immediately enter
into a sale process for the company with $5.76 per share as an
acceptable floor bid.
While we believe there is significant value in
LL Flooring’s underlying net assets (including its strong brand and
market position) that is in excess of the current market price, and
potentially in excess of the $5.76 per share offer, unfortunately,
as evidenced by the company’s record of severe underperformance
over the last several years, it is apparent that management change
would be necessary for stockholders to benefit from that value.
While competitors demonstrated strong
performance in 2022, LL Flooring lagged considerably, with
significant and alarming levels of negative operating cash flow and
inventory buildup. First quarter 2023 results were also extremely
disappointing, and we are gravely concerned by the significant
increase in the company’s SG&A as a percentage of net
sales.
If anything, LL Flooring’s record of
underperformance suggests that failing to sell now could threaten
further value erosion for stockholders.
In our view, a sale now, at this price or above,
whether to the F9 Group or to an alternative bidder, would provide
stockholders an attractive opportunity to obtain immediate
liquidity at a fair valuation in excess of what LL Flooring, with
its management as currently constituted, can be expected to
achieve.
For these reasons, we strongly encourage you –
if the Board has not already done so – to constructively engage
immediately with the F9 Group and to advance an immediate sale
process.
Sincerely,
Howard Jonas
cc: Steve Wolosky and Mitchell Raab, Olshan Frome Wolosky,
LLP
Contact:
Mitchell Raab, Esq.
Olshan Frome Wolosky LLP
mraab@olshanlaw.com
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