Believes Fully-Financed Offer Represents
Compelling and Certain Value for LL Flooring Shareholders and is a
Highly Attractive Alternative to Substantial and Extended Value
Erosion Overseen by LL’s Board and Management
Highly Qualified Director Nominees – Tom
Sullivan, Jason Delves, and Jill Witter – Are Committed to
Maximizing Shareholder Value
F9 Investments, LLC (“F9”) which, together with its affiliates,
collectively owns approximately 8.8% of LL Flooring Holdings,
Inc.’s (“LL Flooring” or the “Company”) (NYSE: LL) common stock,
today sent a letter to the Board of Directors (the “Board”) of LL
Flooring proposing to acquire all the issued and outstanding shares
of common stock of LL Flooring for $3.00 per share (the “Proposed
Offer”).
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the full release here:
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(Graphic: Business Wire)
The Proposed Offer is not subject to any financing condition and
is fully financed through cash on hand and borrowing under an
existing revolving credit facility from an affiliate of F9. The
value being offered by F9 reflects LL Flooring’s deteriorating
financial and operational performance, as disclosed in its third
quarter 2023 results, as well as the Board’s refusal to
meaningfully engage with F9 and its affiliates or allow it to
perform basic due diligence, following F9’s previously announced
acquisition proposal.
F9’s owner, Thomas Sullivan said, “We believe our offer
represents a compelling, immediate, and certain cash value for LL’s
shareholders, in light of the Company’s deteriorating financial
condition and declining stock price, which in our view reflects the
market’s lack of confidence in the current Board’s strategy. LL
Flooring’s most recent, dismal third quarter earnings performance
further reflects the Board and management’s lack of urgency,
credible plan, execution ability, or capacity to control costs
despite numerous pledges to do so.”
F9 also announced that Mr. Sullivan intends to nominate three
highly qualified candidates to LL Flooring’s Board of Directors at
the 2024 Annual Meeting of Stockholders (the “Annual Meeting”). The
nominees include:
- Thomas Sullivan, Founder and Chairman of Cabinets to Go,
LLC (“Cabinets to Go”), Founder and former CEO of Lumber
Liquidators (currently known as LL Flooring), Sole Member, Manager
and President of F9 Investments.
- Jason Delves, President and CEO of Cabinets to Go,
former President of Wood Fiber Technologies, LLC and Beasley
Flooring Products, LLC.
- Jill Witter, Chief Legal Officer and Secretary of F9
Investments, LLC, former Secretary of the Board of Directors of
Lumber Liquidators (currently known as LL Flooring).
Mr. Sullivan added, “Given the LL Flooring Board’s lack of
meaningful engagement with us over the past six months or any
communication about its strategic review process, we have no choice
but to assume that the Board is prioritizing its own self-interest
over its fiduciary responsibility to maximize value for all LL
Flooring shareholders. Accordingly, we have decided to nominate
three candidates to the Board at the next annual meeting, who we
believe collectively bring significant executive and public company
board experience necessary to lead a successful exploration of
potential strategic alternatives for the Company and who are
committed to maximizing the value of LL Flooring for all
shareholders.”
The full text of F9’s letter to the Board of LL Flooring
follows:
VIA E-MAIL AND OVERNIGHT
MAIL
November 14, 2023
Nancy M. Taylor Chairperson of the Board LL Flooring Holdings,
Inc. 4901 Bakers Mill Lane Richmond, VA 23230
Charles Tyson Chief Executive Officer LL Flooring Holdings, Inc.
4901 Bakers Mill Lane Richmond, VA 23230
Dear Ms. Taylor and Mr. Tyson:
On behalf of F9 Investments, LLC, together with Thomas D.
Sullivan and Jason Delves (collectively, “we” or “F9 Investments”),
we are writing today to reiterate our strong interest in pursuing
an all-cash acquisition of LL Flooring Holdings, Inc. (the
“Company” or “LL”) by an affiliate of F9 Investments. As current
shareholders, we are dismayed to see third quarter results continue
the pattern of declining sales, transaction volume and earnings,
concurrent with significant negative free cash flow and a nearly
100% increase in leverage. As shown in the attached charts, while
LL’s peers have created significant value for shareholders, LL has
generated substantial shareholder losses of 62% over the last
twelve months, 89% over the past three years and 77% over the past
five years. We believe our offer has strategic logic and presents
your shareholders with immediate liquidity at a considerable and
meaningful value for their shares.
We are prepared to offer $3.00 per share in cash for all of the
issued and outstanding shares of common stock of the Company not
owned by F9 Investments or its affiliates. Our offer is subject to
confirmatory due diligence, including confirming the value and/or
useful life of the current inventory, and to reviewing any
potential off-balance sheet liabilities, including but not limited
to the potential for future negative rulings related to antidumping
and countervailing duties investigations, litigation liabilities
and other commitments.
We believe our offer represents a compelling opportunity that
your shareholders will find attractive, especially in light of the
Company’s deteriorating financial condition and declining stock
price which, we believe, reflects the market’s lack of confidence
in the current Board’s strategy.
Despite LL’s substantial three-year decline in sales and
earnings, we believe that a sale of the Company to F9 Investments
is the most logical and strategic approach. We believe that our
knowledge of the hard-surface flooring market positions us uniquely
to address the Company’s declining performance and represents the
best means for LL shareholders to maximize the value of their
shares.
Our offer is not contingent on financing and we want to make
clear that we have the financial ability to consummate a
transaction. We plan to fund the acquisition through cash on hand
and borrowing under our existing revolving credit facility. Upon
request, we will provide proof of funds evidencing that we have
sufficient capital to complete this proposed transaction.
On May 26, 2023, F9 Investments presented the Board of Directors
of the Company with a cash offer of $5.76 per share, which at that
time represented a premium of over 100% of the stock’s 52 week low
of $2.75. The Board of Directors summarily rejected this proposal.
We withdrew this offer following LL’s continued underperformance in
the quarter ended June 30, 2023, in which LL reported a $1.35 net
loss per common share, continued deterioration of operations and
increasing selling, general and administrative (SG&A) expenses.
LL's downward trajectory continued into the following quarter ended
September 30, 2023, with negative 20% year-over-year net sales
growth, an additional net loss per share of $1.25 and a $37M
increase in total debt (from $40M as of June 2023 to $77M as of
September 2023). The challenging macroeconomic and retail
environment, coupled with LL’s sustained net sales declines,
collective losses and increased leverage, have put LL in an even
more precarious financial position than at the time of our previous
offer, resulting in our revised proposal.
On August 14, 2023, the Company announced that the Board of
Directors was initiating an exploration of “strategic alternatives”
whereby the Board would consider a wide range of options for the
Company including, among other things, “a potential sale, merger or
other strategic transaction.” Despite our attempts to discuss a
potential transaction, you refused to allow confirmatory due
diligence that may have enabled us to resubmit our original offer
unless and until we agreed to a “standstill agreement” that would
have prevented us from nominating a slate of candidates for
election to the Board of Directors at the next annual meeting of
shareholders. Given the Board of Directors’ track record and
repeated history of refusing to meaningfully engage with us, we
were and continue to be unwilling to enter into a standstill
agreement which prevents us from nominating candidates at the
upcoming annual meeting.
In an effort to move forward with our offer, we are prepared to
enter into a reasonable confidentiality agreement that would enable
us to engage in confirmatory due diligence.
We and our advisors stand ready to move expeditiously and,
assuming appropriate engagement from the Company, complete our
confirmatory due diligence and get to a signed transaction in 30
days. To that end, we are committed to work collaboratively with
the Company, its management and its Board of Directors. Of course,
if, as a result of our confirmatory due diligence, we find evidence
of significant additional value inherent in the Company based on
matters we are not aware of, we may be willing to upwardly adjust
the offer price.
It is Mr. Sullivan’s current intent to nominate a slate of
qualified candidates for the election to the Board of Directors of
the Company at the Company’s 2024 annual meeting, and accordingly,
Mr. Sullivan has submitted a Notice of Stockholder Nominations to
the Company. Given the Company’s declining performance and the
Board of Directors’ refusal to meaningfully engage with us to
maximize shareholder value, we view the nomination and election of
our nominees as essential for the Company to bring the much-needed
accountability, oversight and shareholder alignment to the
boardroom to drive value for the benefit of all shareholders.
This proposal presents a non-binding offer and does not
represent or create any legally binding or enforceable obligations.
No such obligations will arise unless and until both parties (or
their affiliates) execute mutually acceptable written definitive
documentation with respect to a transaction. We reserve the right
to withdraw or modify our proposal at any time.
We strongly urge the Board of Directors to engage with us
regarding this proposal. We believe our proposal provides the Board
of Directors the ability to attain the highest possible price for
the Company’s shareholders.
Sincerely,
F9 INVESTMENTS, LLC
Thomas D. Sullivan President
Advisors
Solomon Partners Securities, LLC is serving as F9’s financial
advisor and Dentons US LLP is serving as its legal advisor.
About F9 Investments
F9 Investments is a private equity firm based in Miami Beach,
Florida. We Invest in Clean Energy, Direct to Consumer Retail,
Commercial and Industrial Real Estate.
Forward Looking Statements
Statements in this press release contain various forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, or the Securities Act, and Section 21E of the
Securities Exchange Act of 1934, as amended, or the Exchange Act,
which represent our management’s beliefs and assumptions concerning
future events. These statements are intended to qualify for the
“safe harbor” from liability established by the Private Securities
Litigation Reform Act of 1995. When used in this press release, the
words “expects,” “plans,” “anticipates,” “indicates,” “believes,”
“forecast,” “guidance,” “outlook,” “may,” “will,” “should,”
“seeks,” “targets” and similar expressions are intended to identify
forward-looking statements. Forward-looking statements involve
risks, uncertainties and assumptions, and are based on information
currently available to us. Actual results may differ materially
from those expressed in the forward-looking statements due to many
factors, including, without limitation, matters of which we may not
be aware, the outcome of any discussions between LL Flooring
Holdings, LLC (“LL Flooring”) and F9 Investments, LLC and its
affiliates (collectively, “F9 Investments”) with respect to a
possible transaction, the ultimate outcome of any possible
transaction between F9 Investments and LL Flooring, including the
possibility that LL Flooring will reject the proposed transaction
with F9 Investments, uncertainties as to whether LL Flooring will
cooperate with F9 Investments regarding the proposed transaction,
the effect of the announcement of the proposed transaction or board
changes on the ability of LL Flooring to operate its business and
to maintain favorable business relationships, the timing of the
proposed transaction, the ability to satisfy closing conditions to
the completion of the proposed transaction (including any necessary
shareholder approvals), other risks related to the completion of
the proposed transaction and actions related thereto, changes in
financial markets, changes in economic, political or regulatory
conditions, changes in facts and other circumstances and
uncertainties concerning the proposed transaction; and other
factors set forth from time to time in LL Floorings’ SEC filings,
including its Annual Reports on Form 10-K and Quarterly Reports on
Form 10-Q, as well as other documents that will be filed by F9
Investments and LL Flooring, as applicable. Given the risks and
uncertainties surrounding forward-looking statements, you should
not place undue reliance on these statements. In light of these
risks and uncertainties, the forward-looking events discussed in
this press release might not occur. Our forward-looking statements
speak only as of the date of this press release or as of the dates
so indicated. We undertake no obligation to update or revise
forward-looking statements, whether as a result of new information,
future events, or otherwise.
Additional Information
This press release does not constitute an offer to buy or
solicitation of an offer to sell any securities. This press release
relates to a proposal which F9 Investments has made for an
acquisition of LL Flooring and to nominate persons to serve on the
LL Flooring Board of Directors. In furtherance of these proposals
and subject to future developments, F9 Investments (and, if a
negotiated transaction is agreed, LL Flooring) may file one or more
proxy statements or other documents with the SEC. This press
release is not a substitute for any proxy statement or other
document F9 Investments and/or LL Flooring may file with the SEC in
connection with the proposed transaction.
Investors and security holders of LL Flooring are urged to read
the proxy statement(s), prospectus and/or other documents filed
with the SEC carefully in their entirety if and when they become
available as they will contain important information about the
proposed transaction. Any definitive proxy statement(s) (if and
when available) will be mailed to stockholders of Public Storage
and/or Life Storage, as applicable. Investors and security holders
will be able to obtain free copies of these documents (if and when
available) and other documents filed with the SEC by F9 Investments
through the website maintained by the SEC at
http://www.sec.gov.
This press release shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the U.S.
Securities Act of 1933, as amended.
This press release is neither a solicitation of a proxy nor a
substitute for any proxy statement or other filings that may be
made with the SEC. Nonetheless, F9 Investments and its affiliates
and its and their officers and employees, as well as the nominees
named above, may be deemed to be participants in the solicitation
of proxies in respect of the proposed transactions. You can find
information about certain of these persons in the Schedule 13D and
amendments thereto originally filed with the SEC on May 25, 2023.
Additional information regarding the interests of such potential
participants will be included in one or more proxy statements or
other documents filed with the SEC if and when they become
available. These documents (if and when available) may be obtained
free of charge from the SEC's website at http://www.sec.gov.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231114412984/en/
Media: Jonathan Gasthalter/Nathaniel Garnick Gasthalter &
Co. (212) 257-4170 F9Investments@gasthalter.com
Investors: Michael Fein Campaign Management (212) 632-8422
michael.fein@campaign-mgmt.com
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