Furniture Brands strikes back at Sun Capital, urges shareholders to back company's proxy

By Lisa Kerner

Charlotte, N.C., April 18 - Furniture Brands International Inc. said allowing designees of SCSF Equities LLC and its affiliates (Sun Capital) access to the company's proprietary business information is not in its shareholders' best interest.

Sun Capital, in an April 17 letter to Furniture Brands, called the company's concerns about a transfer of information from Sun Capital to its portfolio companies in the industry unfounded, adding that it remains willing to enter into a formal nondisclosure/confidentiality agreement with Furniture Brands.

In an April 18 letter to its shareholders, Furniture Brands said Sun Capital's desire to acquire the company is "well known" and accused Sun Capital of repositioning its intent "using the tactic of obtaining board seats."

On April 3, SCSF Equities said it would nominate three candidates for election to the Hickory, N.C., furniture company's eight-member board of directors at the 2008 annual meeting on May 1:

• Alan Schwartz, Sterling Professor of Law at Yale Law School;

• Ira Kaplan, chief financial officer of Claire's Stores Inc.; and

• T. Scott King, managing director of Sun Capital Partners, Inc.

Furniture Brands said it has offered Sun Capital the opportunity to add a single, independent board member provided Sun Capital refrain from "publicly disparaging" the company and not repeat its "costly, distracting proxy contest" before the 2009 annual meeting.

"We believe Sun Capital clearly seeks critical mass on our board in order to advance its self-serving agenda," the company's letter said.

Furniture Brands maintains that while it has been open "to a constructive resolution of Sun Capital's concerns," the shareholder has not suggested a strategic plan superior to the one management is now successfully executing, the letter said.

"Our announcement [Thursday] of preliminary financial results for the first quarter of 2008 underscores the fact that our plan is showing results and is on a timetable that is delivering value to all stockholders today," Furniture Brands stated.

Furniture Brands urged shareholders to reject Sun Capital's agenda and to support the company's proxy.

Previously, Sun Capital said it didn't believe the current Furniture Brands board is acting in the best interests of shareholders.

Specifically, Sun Capital said Furniture Brands' board appears to have given little consideration to at least two "serious and credible proposals to acquire the company at prices well above the existing stock price." One of the proposals came from Sun Capital.

Sun Capital said Furniture Brands' concern that the investor's prior interest in acquiring the company might represent a conflict of interest is unwarranted.

"Should Sun Capital decide to submit a formal proposal regarding a strategic transaction, we would expect the board to adhere to market practice and form a special committee of disinterested directors to properly evaluate our proposal and retain outside financial and legal advisors," Sun Capital said in its April 17 letter.

Sun Capital said the committee would not be expected to include King and noted that Schwartz and Kaplan "are completely independent and have no prior relationship with Sun Capital."

It was previously reported that Sun Capital reiterated its willingness to consider all alternatives to maximize shareholder value and could assist in the "pursuit of a more dynamic turnaround strategy" for the company.

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