ATLANTA, June 12, 2012 /PRNewswire/ -- Covington
Investments, LLC (together with its affiliates ("Covington")),
today issued the following open letter to the shareholders of
Advocat Inc. (NASDAQ: AVCA) (the "Company") in response to the
results of the Company's annual shareholders' meeting held on
June 7, 2012:
June 12, 2012
Dear Fellow Shareholder:
In a press release on June 11,
2012, the Company announced the results of its annual
shareholders' meeting vote. We are surprised by the Company's
positive reaction to these results and disagree with its on-going
assertion that the views of its Board of Directors are in alignment
with those of its broader shareholder base.
Notably absent from the press release were the actual results of
the annual shareholders' meeting vote. Though the voting
results were subsequently released in a Form 8-K filing (as
required by the Securities and Exchange Commission rules), their
absence from the Company's press release is telling. Despite
assertions by the Company that the results of the annual meeting
show "strong shareholder support... which indicates affirmation of
Advocat's leadership and continuing execution of [its] strategic
operating plans", one only has to parse through the actual results
of the vote to see the notable lack of support from independent,
non-director shareholders. This is a direct contradiction of
the Company's view expressed in their press release of May 14, 2012, that the opinions of its Chairman
and Vice Chairman of the Board "serve as useful proxies for the
views of many of [Advocat's] shareholders" and further demonstrates
just how out of touch and unconcerned the Board of Directors is
with the broader shareholder base of the Company.
The Company claims strong shareholder support, however excluding
the 1,692,172 shares held by the Chairman and Vice Chairman of the
Board, only 1,309,163 shares voted FOR re-election of the existing
directors versus 1,519,747 shares, over 54% of the non-insider
shares voting, that WITHHELD their vote. We interpret this as
a clear sign that non-insider shareholders have no confidence in
the current Board or its strategy. The fact that the majority
of shares (other than those belonging to the Chairman and Vice
Chairman) voted "WITHHOLD" rather than "FOR" directors is a strong
signal from the Company's shareholders that they are unhappy with
its performance and decision not to engage in discussions with
Covington regarding its acquisition proposal. It is evident
that the Company is not listening to the views of its independent,
non-director shareholders. They have voted loud and clear at
the annual meeting and a majority have no confidence in this
Board.
We think it is unacceptable that the Company continues to ignore
our request, and the request of other shareholders, to provide more
detail about its uncertain strategic plan and how it might possibly
deliver value greater than the certainty of Covington's
$8.50 all cash per share proposal.
We believe that by failing to listen to the views of
non-director shareholders the Board is failing in the exercise of
its fiduciary duties. We urge the Board to engage with
Covington to give shareholders and its employees a choice and allow
their voices to be heard.
Sincerely,
/SIG/
John E. McMullan
President
Covington Investments, LLC
About Covington Investments, LLC
Covington's affiliates own and operate continuing care
retirement communities offering skilled nursing, assisted living,
independent living and home health services in Florida, Ohio, and Tennessee. The Companies' combined campuses
comprise over 1,000 skilled nursing and assisted living beds as
well as nearly 600 independent living units.
SOURCE Covington Investments, LLC