LL Flooring rejects acquisition proposal
LL Flooring Holdings, Inc. announced this morning that its board of directors has unanimously rejected an unsolicited, non-binding proposal from Cabinets To Go, LLC.
Cabinets To Go, a subsidiary of F9 Brands, Inc., had proposed acquiring all of LL Flooring’s outstanding shares for $5.76 per share in cash. LL Flooring previously acknowledged receipt of the unsolicited proposal on May 30.
On the morning of June 26, LL Flooring shares were trading at $4.34 per share.
In a statement issued by the flooring retailer, the Richmond, Va.-based company said “The LL Flooring Board and management team are committed to enhancing shareholder value and regularly review the Company’s strategic alternatives and assess opportunities to further this objective.”
“Consistent with its fiduciary duties and in consultation with its financial and legal advisors, upon receipt, the LL Flooring Board carefully reviewed and considered Cabinets To Go’s non-binding proposal,” the retailer said. “The Board unanimously determined that the proposal significantly undervalues the worth of LL Flooring, its business and prospects and is not in the best interests of the Company and its shareholders.”
LL Flooring’s board also said it is “always open to considering” a transaction that reflects the Company’s value and prospects.
“The LL Flooring Board of Directors is committed to enhancing shareholder value and we are open-minded about the best path to achieve this objective,” said LL Flooring Independent Chairperson of the Board, Nancy Taylor. “The board undertook a comprehensive review of the Cabinets To Go proposal and determined that it significantly undervalues LL Flooring. We remain open to engaging further on any opportunity that we believe will deliver appropriate value to all our shareholders.”
“LL Flooring’s unique positioning differentiates it from others in the market, and the board and management team are confident in the company’s business plan as it continues to deliver the high-touch service of an independent flooring retailer combined with the value and convenience of a national brand,” Taylor added.
This past May, LL Flooring also delivered its first quarter 2023 financial report, which were well below expectations. At the time of the report’s release, LL Flooring CEO Charles Tyson described the quarter as “very challenging.”
Net sales for the first quarter declined 13.7% to $240.7 million compared to sales of $279 million for the first quarter last year. LL Flooring also posted a net loss of $10.6 million for the quarter. In the prior first quarter, the company reported a net income of $4 million.
J.P. Morgan Securities LLC is serving as financial advisor, and Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal advisor to the LL Flooring.
LL Flooring operates 440 stores nationwide and offers 500 varieties of hard-surface floors.
Rejection Letter
The LL Flooring Board of Directors communicated its response to F9 Investments and Cabinets To Go in the following letter on June 26, 2023:
F9 Investments, LLC
844 Alton Road
Miami Beach, FL 33139
Attn: Tom Sullivan, Sole Manager
Cabinets To Go, LLC
2350 W O Smith Street
Lawrenceburg, TN 38464
Attn: Jason Delves, Chief Executive Officer
Dear Messrs. Sullivan and Delves:
I am writing this letter on behalf of the Board of Directors (the “Board”) of LL Flooring Holdings, Inc. (“LL Flooring” or the “Company”) in response to your letter, dated May 26, 2023, regarding your interest in acquiring LL Flooring. Since receiving your indication of interest, the Board has met several times and, with the assistance of our independent financial advisor, JP Morgan Chase & Co., and our legal advisor, Skadden, Arps, Slate, Meagher & Flom LLP, carefully reviewed and considered it along with a variety of factors and information.
Following our comprehensive review process, the Board is unanimous in its belief that the price of $5.76 per share in cash proposed in your letter significantly undervalues LL Flooring, its business and prospects. In making its determination, the Board considered LL Flooring’s attractive market position as the Company delivers high-touch service and in-store customer experience of an independent flooring retailer, combined with the value, convenience, assortment and digital capabilities of a scaled, national specialty retailer. The Board believes that despite macroeconomic headwinds LL Flooring’s future is bright and is confident in the Company’s ability to execute its business plan and achieve its growth objectives. The Company has several value enhancing initiatives in the pipeline and we firmly believe that pursuing your opportunistically-timed $5.76 per share proposal will transfer the Company’s upside potential to Cabinets To Go, LLC and away from LL Flooring’s stockholders.
Nonetheless, the Board is deeply committed to enhancing value for all of our stockholders and receptive to opportunities that will help us achieve that goal. In that spirit, the Board is open to discussions about a transaction that adequately reflects the value of LL Flooring’s business and prospects as well as the significant benefits that would accrue to F9 Investments, LLC and Cabinets To Go, LLC as a result of an acquisition of LL Flooring.
If you were to significantly increase your $5.76 per share proposal to a level that is reflective of the value of the Company, we will consider it consistent with the Board’s fiduciary responsibilities and provide you with confidential information pursuant to a customary non-disclosure and standstill agreement.
If you have an interest in communicating further on this basis, feel free to contact me at your earliest convenience.
Very truly yours,
Nancy M. Taylor
