Ruby Tuesday, based in Maryville, has agreed to sell out to an Atlanta private equity firm. Angela Gosnell/News Sentinel
Ruby Tuesday executives fired back Monday against lawsuits alleging they didn’t get the best price for the company – not with a court filing, but in a news release criticizing one alternative offer.
The Maryville-based restaurant chain announced plans in mid-October to sell out to NRD Capital, an Atlanta private equity firm. But, in November, at least eight shareholders filed class action suits to stop the sale, arguing the company failed to pursue better offers from other buyers.
On Monday, Ruby Tuesday announced it had received Dec. 12 another “highly-conditional and not fully-financed proposal” from one of those putative buyers: the Boaz Group LLC, headed by La-Van Hawkins.
NRD offered to buy all Ruby Tuesday common stock for $2.40 per share in cash, 21 percent above Ruby Tuesday’s closing share price on Oct. 13. The $335 million deal included assumption of Ruby Tuesday’s debt, making it worth $146.3 million to shareholders.
Boaz offered $2.88 per share, the same it offered several months ago, according to the SEC filings and lawsuits in which Boaz is identified as “Bidder 11.” That would increase the sale’s value – and thus shareholder’s profits – by $40 million, according to a suit filed by Jonathan Raul on Nov. 13.
But in its latest announcement, Ruby Tuesday’s board says Boaz “repeatedly disappointed by submitting proposals that in each case lacked a credible financing plan” over the past nine months.
“During the process, Boaz submitted six highly-conditional acquisition proposals, none of which contained committed financing despite repeated requests that Boaz needed to provide a fully-financed proposal in order for the proposal to be actionable and repeated assurances from Boaz that financing commitments were forthcoming,” the news release says.
That’s still the case with the latest offer, so Ruby Tuesday’s board rejected it as well.
“The Board of Directors of Ruby Tuesday continues to unanimously recommend that Ruby Tuesday stockholders vote ‘FOR’ the proposal to approve and adopt the merger agreement with affiliates of NRD Capital,” the announcement says.
The deal is expected to close Dec. 21, according to the news release.
The lawsuits filed in U.S. District Court for the Eastern District of Tennessee allege the sale violates the Securities Exchange Act of 1934. A central issue is the proxy statement Ruby Tuesday issued to its shareholders, which is — in the words of the earliest suit, filed Nov. 8 by Marcell Maseman — “materially incomplete and misleading.”
Six of the suits name as defendants Ruby Tuesday, its president and CEO James Hyatt II, non-executive chairman Stephen Sadove, and the company’s other six directors. Two more suits add NRD to that list.
The plaintiffs allege several other buyers, including Boaz, were still interested – and several offered more than NRD, but Ruby Tuesday failed to pursue them.
Plaintiffs seek to stop the deal at least until shareholders get all relevant information; alternatively, they seek compensation for damages resulting from the rule violations.
The restaurant chain announced in August its revenue declined nearly 13 percent during the previous fiscal year. That included the effects of closing 103 restaurants. In March, the company agreed to consider sale or merger.
As of Sept. 5 there were 599 Ruby Tuesdays: 541 company-owned and 58 franchises. Locally, the chain has two restaurants in Alcoa, and one each in Athens, Harriman, Jefferson City, Knoxville, Lenoir City, Morristown, Newport, Powell and Sevierville.