Investment group pushes for seats on Furniture Brands board

Less than a month from its annual shareholders meeting, Clayton-based Furniture Brands International Inc. is facing a serious challenge from a major shareholder.

SCSF Equities – an affiliate of Sun Capital Partners of Boca Raton, Fl. — on Thursday nominated three directors for election and urged shareholders to ignore any competing proxy voting cards sent out from Furniture Brands.

The hostile move came after Sun Capital said it was interested in buying Furniture Brands — a proposal the company stiff-armed earlier this year. Before the Sun Capital proxy documents became public, Furniture Brands called the group’s actions “a distraction.”

Sun Capital, a $10 billion investment group, nominated the following: Alan Schwartz, 68, a professor at Yale Law School; Ira Kaplan, 49, chief financial officer of Claire’s Stores; and T. Scott King, 56, managing director of Sun Capital Partners.

The nominees will help protect stockholder value through “due consideration of strategic alternatives” that may lead to a sale of Furniture Brands, in whole or in part, Sun Capital said in a filing with the Securities and Exchange Commission. The nominees would thoroughly investigate “all business combination or acquisition proposals that (Furniture Brands) has received and failed to pursue in the last year.”

In a press release, Sun Capital was even more blunt, faulting what it called the ”intransigence” of the company’s board. Sun Capital claimed the board gave “very little consideration to at least two serious and credible proposals to acquire the Company at prices well above the existing stock price.” Sun Capital called that a “serious disregard of shareholder interests,” and faulted Furniture Brands’ turnaround strategy for not being aggressive enough.

The news came on a day when Furniture Brands was trying to tout progress in turning around its business.

The country’s second-largest home furnishings manufacturer lost money last year. But on Thursday morning — before the Sun Capital filings became public — it said it expected to earn 40 cents to 60 cents per share this year. That would be a big turnaround from the previous year. But excluding last year’s loss, 2008 would be the lowest per-share total since 1995.

The company – which sells furniture under the Lane, Broyhill, Thomasville, Henredon and Drexel Heritage nameplates — also said it had paid down $45 million in debt so far this year.

It now has current debt of $235 million, compared to $170 million in “cash on hand,” according to a document filed Thursday with the Securities and Exchange Commission. Three months ago, it had about $119 million of cash and cash equivalents, according to the company’s annual report.

The company recently acquired 11 Thomasville stores for “minimal investment,” it said.

The company is trying to simplify its supply chain and organizational structure. It expects to reap between $40 million and $50 million in annual cost savings from centralizing and automating “transactional processes.” It reduced dividends by $23 million annually.

Last year, it cut employment by nearly 14 percent, slashing 1,900 jobs and leaving six manufacturing facilities. It now employs 12,000 people and operates 21 facilities in Virginia, North Carolina, Mississippi, Indonesia and the Philippines.