The Forzani Group Ltd. is recommending that shareholders oppose plans announced last week by Crescendo Partners, a New York-based hedge fund, to nominate its own slate of directors for election to FGL's board of directors after the firm accumulated over 5% of Forzani shares. Crescendo is requesting that the current eight member FGL board expand by two members and that one current member resign.
“Last month Crescendo informed us that it owned 5.1% of FGL's shares, demanded two seats on our board of directors and threatened a proxy fight if we declined,” said Forzani Chairman John Forzani. “As a matter of good governance, FGL's board undertook a clear and transparent process to consider Crescendo's demands. Based on a number of factors, the board unanimously determined that the company and its shareholders would be best served by denying Crescendo's extraordinary demands.”
Forzani said that in its discussions with Crescendo, the hedge fund refused to name its proposed directors and failed to provide a compelling rationale to support its demands. Well in advance of Crescendo contacting FGL, the company had commenced the process of selecting a qualified nominee to replace a retiring director. FGL said that pursuant to the company's governance process, a highly qualified replacement nominee was selected before Crescendo demanded three nominees.
In a May 1 letter from FGL Chairman John Forzani to Eric Rosenfeld, Managing Member, Crescendo Partners, Forzani wrote, “At one point in our discussions, you threatened to launch a proxy fight should your request be declined. We believe such a move would cause the company needless distraction and expense, and that it would ultimately fail. We trust you will reconsider your position and that you will remain a supportive long-term shareholder of the company.”
The
Forzani Group Ltd. said it recommends that shareholders oppose plans announced
late yesterday by Crescendo Partners to nominate its own slate of two directors
for election to FGL's board of directors. Crescendo is a New York-based hedge
fund.
“Last
month Crescendo informed us that it owned 5.1% of FGL's shares, demanded three
seats on our board of directors and threatened a proxy fight if we
declined,” said John Forzani, Chairman. “As a matter of good
governance FGL's board undertook a clear and transparent process to consider
Crescendo's demands. Based on a number of factors, the board unanimously
determined that the Company and its shareholders would be best served by
denying Crescendo's extraordinary demands.”
In its
discussions with FGL, Crescendo refused to name its proposed directors and
failed to provide a compelling rationale to support its demands. Well in
advance of Crescendo contacting FGL, the Company had commenced the process of
selecting a qualified nominee to replace a retiring director. Pursuant to the
Company's governance process, a highly qualified replacement nominee was
selected before Crescendo demanded three nominees.
The
complete text of a May 1, 2009 letter from John Forzani to Eric Rosenfeld,
Managing Member, Crescendo Partners, is provided below for the benefit of FGL
shareholders.
Mr.
Forzani added, “The Company's board and management intend to remain
focused on implementation of the Company's recently announced strategic plan
and growth initiatives. We believe that the initiatives we announced at our
Investor Day presentation on April 28 have been very positively received by our
shareholders and analysts. We will not be distracted by Crescendo's
announcement yesterday and intend to move forward with our plan to build value
for all shareholders.”
Earlier
this week FGL mailed a Management Proxy Circular with its slate of eight
nominees for the FGL board. The election of directors will take place at the
Company's Annual General Meeting on June 10, 2009. A copy of the Management
Proxy Circular is available at the Company's profile on SEDAR at www.sedar.com.
FGL
understands that Crescendo has issued its own proxy circular and FGL will respond
to it in due course, after having taken the opportunity to review it.
FGL and
its board are advised by Greenhill & Co., as independent financial
advisors, Blake, Cassels & Graydon LLP, as legal counsel and Georgeson
Shareholder Communications Inc., as proxy solicitation agent.
Following
is the text of the letter from John Forzani to Eric Rosenfeld.
May 1,
2009
Mr. Eric
Rosenfeld
Managing
Member
Crescendo
Partners II, L.P.
825 – 3
Ave. 40th floor
New York, NY 10022
Dear
Eric:
As you
know, our Board met earlier today to consider your request. I am
writing
to convey the decision of the Board.
Crescendo
has told the Company that it owns approximately 5.1% of the
Company's
shares and has requested that it be allowed to nominate three
members
of a 10 person board of directors by expanding the Board by two new
members
and having one of the existing directors resign.
In
evaluating your request, the Board considered a number of factors,
including:
1. The
Company has an active, engaged and highly-qualified board of
directors with a diverse range of skills,
deep industry expertise, an
independent lead director and other
corporate governance best practices.
2. The
Company has an established corporate governance process for the
nomination of new directors. The process
includes reviewing the
composition and size of the Board and
assessing the effectiveness of the
Board, including the qualifications and
skill set provided by the current
board members and evaluating the experiences
and skills brought by
potential new nominees to ensure that those
experiences and skills will
support the continuing effectiveness of the
Board.
3. The
Company is performing well in the face of current economic
conditions.
4.
Management recently presented a long-term strategic plan for the Company,
as reviewed and approved by the Board, that
has been well received by
analysts and investors. In this regard, we
were pleased to hear from Bob
Sartor that at our Investor Day you and your
colleagues were
complimentary of the business strategy.
5.
Crescendo was unwilling to provide a compelling rationale to support your
request, and failed to identify any
particular business initiatives,
plans or strategies that you or your
nominees would bring to the Board or
to the Company.
6.
Crescendo was unwilling to identify any other shareholders of the Company
who Crescendo believes share its views or
support the demand for Board
representation.
7. A
number of large shareholders have advised the Company that they would
not support Crescendo's request, and the
Board believes that a majority
of our shareholders will support our Board.
8.
Crescendo was unwilling to provide the names of the persons who it would
propose be nominated as members of the Board
but only stated they would
be qualified.
9. We
have spoken to several of the references you provided and, as you
would expect, these individuals were
complimentary of you and your
colleagues. We also spoke to other
individuals familiar with situations
where Crescendo has had board
representation. In no case did any of these
individuals identify differentiating value
provided by Crescendo as
compared to other qualified directors.
After
giving careful consideration to these and other factors the Board has
unanimously
determined that the Company will not grant Crescendo's request.
We trust
you will be satisfied with the process we have undertaken and that
you will
accept the decision of the Board. At one point in our discussions,
you
threatened to launch a proxy fight should your request be declined. We
believe
such a move would cause the Company needless distraction and
expense,
and that it would ultimately fail. We trust you will reconsider
your
position and that you will remain a supportive long-term shareholder of
