Bassett, La-Z-Boy, Select get flak from shareholders
By Larry Thomas -- Furniture Today, April 6, 2008
High Point — Furniture Brands International isn't the only publicly held home furnishings company facing criticism from disgruntled shareholders.
In recent weeks, Bassett, La-Z-Boy and Select Comfort have been targeted by shareholders unhappy with the companies' financial performance and the declining stock price.
In Bassett's case, a proxy fight is underway in advance of the company's April 15 annual meeting after the dissident shareholder, an investment group called Costa Brava Partnership, put up nominees for seven seats on the company's nine-member board of directors.
La-Z-Boy and Select Comfort aren't facing proxy battles as of yet, but both recently received public tongue-lashings from unhappy stockholders.
La-Z-Boy's was courtesy of the California Public Employees Retirement System, the nation's largest public pension fund. The fund, commonly known as CalPers, named La-Z-Boy to its dubious Focus List, which spotlights five publicly traded companies that it believes have underperformed on a variety of financial and corporate governance measures.
CalPers cited La-Z-Boy's deteriorating revenue growth and operating margins and said it wants the company to "declassify" its board of directors and eliminate staggered terms for board members. That would require each director to stand for reelection annually.
"While the La-Z-Boy board respects CalPers position, it has a fundamental difference of opinion with CalPers on the issue of a declassified board of directors," said Kathy Liebmann, La-Z-Boy director of investor relations and corporate communications. "Most importantly, the board of directors and management team of La-Z-Boy are focused on improving the performance of the company and managing it for long-term profitable growth."
Bassett and shareholder Costa Brava Partnership, meanwhile, have each mailed proxy statements to shareholders urging them to vote for their slate of directors at next week's meeting. Bassett later amended its original proxy to include a letter that describes Costa Brava as a "small dissident group" and urged shareholders to vote for the company-based candidates.
"Apart from seeking to replace the board with its own hand-picked paid nominees (who do not appear to have any significant furniture industry expertise), Costa Brava has offered no plan for the future of the company and no good reason that you should hand control of your company to them," the letter read.
Costa Brava owns about 5.1% of Bassett's outstanding shares.
On April 1, Costa Brava sent a letter of its own to Bassett shareholders, saying the company should reduce the capital needs of its furniture business and maximize the value of its investment and real estate portfolio, which includes a 46.9% stake in the International Home Furnishings Center, High Point's largest showroom building.
"Management wants to wager your money on its singular focus of repositioning the company as a specialty furniture retailer in a distressed home furnishing industry," the letter read. "Their plan will deplete too much of your stable and secure assets to fund a speculative turnaround effort in an industry that in recent months has seen several bankruptcy filings."
The letter goes on to urge Bassett to, among other things, pay a special dividend of $2.50 per share to represent the value of marketable securities it owns and consider strategic alternatives such as a merger with another company in the retail furniture business.
"Since 2001, the company has spent over $40 million in capital expenditures. This spending, however, could not stop the company's retail business from losing almost $45 million over the same period," read the letter. "Now, the company wants to double-down."
Select Comfort's dissident shareholder, Clinton Group Inc., hasn't threatened a proxy fight, but sent a letter to the board of directors demanding sweeping changes in the company's marketing programs and cost structure. In the letter, the group urged Select Comfort to, among other things, redirect its advertising dollars into infomercials and related direct marketing efforts.
It also urged the company to close poorly performing stores, freeze spending on a new computer system, move out of its new corporate headquarters and outsource call center operations.
Clinton Group owns about 5.1% of Select Comfort's stock.
The company hasn't responded to the group's letter.
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