Investor Urges Ethan Allen Sale

August 17, 2015  by in Financial Reports, Furniture Retailing, Industry   

Sandell Asset owns about 5.5 percent of the company’s shares and said it plans to nominate a slate of directors for the company’s board.

In Friday’s letter to Farooq Kathwari, Ethan Allen chairman and CEO, Sandell said the company’s stock was trading at a discount to its intrinsic value.

Sandell said the company’s real estate holdings may be worth about $450 million, or about $16 per share, and that the company could enhance shareholder value through either a recapitalization and a monetization of its real estate holdings, or through a sale to a private equity firm. Sandell believes that either option would result in a value of at least $41 per share delivered to shareholders. Ethan Allen shares closed at just over $31 Friday.

“It is also unfortunate that, while you have led Ethan Allen for close to 30 years and have built a unique business of substance, shareholders have suffered extended and material underperformance due in large part to what we believe to be the Company’s sub-optimal fiscal policies and inefficient allocation of shareholder capital over the last several years,” Sandell’s letter said. “Indeed, Ethan Allen serves as an abject example of the ill effects that can befall shareholders invested in a company that does not earn an appropriate return on its capital.”

Two days before Sandell’s letter, Ethan Allen shifted its annual meeting to Oct. 15, a month ahead of its expected Nov. 17 date set in the company’s last proxy statement.