SC 13D/A

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

SCHEDULE 13D

(Rule 13d-101)

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT

TO § 240.13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO

§ 240.13d-2(a)

(Amendment No. 3)¹

J. Alexander’s Holdings, Inc.

(Name of Issuer)

Common Stock, $0.001 par value

(Title of Class of Securities)

46609J106

(CUSIP Number)

FREDERICK DISANTO

ANCORA ADVISORS, LLC

6060 Parkland Boulevard, Suite 200

Cleveland, Ohio 44124

(216) 825-4000

(Name, Address and Telephone Number of Person

Authorized to Receive Notices and Communications)

April 8, 2019

(Date of Event Which Requires Filing of This Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box ☒.

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See § 240.13d-7 for other parties to whom copies are to be sent.

_______________

¹       The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

	1	NAME OF REPORTING PERSONS
			Ancora Advisors, LLC
	2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*				(a) ☐
						(b) ☐
	3	SEC USE ONLY
	4	SOURCE OF FUNDS
			OO
	5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)				☐
	6	CITIZENSHIP OR PLACE OF ORGANIZATION
			NEVADA
NUMBER OF			7	SOLE VOTING POWER
SHARES
BENEFICIALLY					1,261,810
OWNED BY			8	SHARED VOTING POWER
EACH
REPORTING					0
PERSON WITH			9	SOLE DISPOSITIVE POWER
					1,261,810
			10	SHARED DISPOSITIVE POWER
					0
	11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
			1,261,810
	12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES				☐
	13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
			8.59%
	14	TYPE OF REPORTING PERSON
			OO

Item 1. Security and Issuer.

This statement relates to the shares of Common Stock of J. Alexander's Holdings, Inc. The address of the issuer is 3401 West End Avenue, Suite 260 Nashville, TN 37203.

Item 2. Identity and Background.

Ancora Holdings Inc. is the parent company of three investment advisors registered with the SEC under the Investment Advisors Act, as amended: Ancora Advisors LLC, Ancora Family Wealth Advisors, & Ancora Retirement Plan Advisors (collectively, the "Ancora RIAs"). This statement is filed by Ancora Advisors, LLC and includes, if applicable, Shares that may be deemed to be beneficially owned by the other Ancora RIAs. Ancora Advisors, LLC is the investment advisor to the Ancora Trust, which includes the Ancora Income Fund, Ancora Special Opportunity Fund, Ancora/Thelen Small-Mid Cap Fund, and Ancora MicroCap Fund (Ancora Family of Mutual Funds), which are registered with the SEC as investment companies under the Investment Company Act, as amended. The address of the principal office of Ancora Advisors, LLC is 6060 Parkland Boulevard, Suite 200, Cleveland, Ohio 44124.

Ancora Advisors, LLC has the power to dispose of the shares owned by the investment clients for which it acts as advisor, including Merlin Partners, the AAMAF LP, Birchwald Partners LP, Ancora Catalyst Fund LP and the Ancora Family of Mutual Funds. Ancora Advisors disclaims beneficial ownership of such shares, except to the extent of its pecuniary interest therein.

Other than as disclosed immediately below, during the last five years the Reporting Person has not been convicted in a criminal proceeding, nor been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction, as a result of which he was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. On December 18, 2018, Ancora Advisors LLC entered into a settlement with the SEC regarding the violation of Section 206(4) under the Investment Advisers Act of 1940 ("Advisers Act") and Rule 206(4)-5 thereunder, due to the contributing of more than the allowable $350 contribution to certain political campaigns. Ancora consented to the Order and paid a penalty in the amount of $100,000.

Item 3. Source or Amount of Funds or Other Consideration.

Ancora Advisors owns no Shares directly but Ancora Advisors may be deemed to own (within the meaning of Rule 13(d)(3) of the Securities Exchange Act of 1934) Shares purchased for or transferred to the accounts of investment management clients. Ancora Advisors disclaims beneficial ownership of such shares, except to the extent of its pecuniary interest therein.

Merlin Partners, AAMAF LP, Birchwald Partners LP, Ancora Catalyst Fund LP, Ancora Family of Mutual Funds, Employees of Ancora Advisors, LLC and Owners of Ancora Advisors, LLC. have used available and uncommitted cash to purchase shares of the Issuer.

Item 4. Purpose of Transaction.

The Reporting Person has provided a letter to the board of directors (the “Board”) of the Issuer, attached as Exhibit 99.2, proposing to acquire the Issuer for $11.75 per share in cash, a 24% premium to the unaffected share price prior to the Reporting Person’s 13D filing on March 12, 2019. The Reporting Person’s proposal provides a premium value, certainty and liquidity to shareholders that have suffered persistent underperformance driven by a management and the Board that operates the Issuer without regard for outside shareholders and have repeatedly engaged in highly conflicted transactions that have destroyed shareholder value.  The Reporting Person believes that the best path forward for the Issuer is as a private company given its lack of scale, limited growth and illiquidity of its Shares.

Item 5. Interest in Securities of the Issuer.

The following list sets forth the aggregate number and percentage (based on 14,695,176 Shares of Common Stock outstanding on March 13, 2019) of outstanding shares of Common Stock owned beneficially by the Reporting Persons:

The Reporting Persons beneficially own 1,261,810 shares of Common Stock. The Shares represent approximately 8.59% of the outstanding shares of Common Stock.

The Reporting Persons also has an economic exposure to 50,000 notional shares of Common Stock under cash-settled total return swaps, bringing their total economic exposure to 1,311,810 shares of Common Stock (representing approximately 8.93% of the outstanding shares of Common Stock on the same basis).

Name	No. Of Shares	Percent of Class
Ancora Owners/Employees(1)	3,370	.02
Ancora Funds & Partnerships(2)	757,195	5.15
Ancora SMA(3)	501,245	3.41
TOTAL	1,261,810	8.59

(1) These Shares are owned by the owners and employees of Ancora Advisors, LLC.

(2) These Shares are owned by the Ancora Family of Mutual Funds and/or Investment Partnerships, including Merlin Partners, the AAMAF LP, Birchwald Partners LP, Ancora Catalyst Fund LP, for which it is also the General Partner, of which Ancora Advisors acts as the discretionary portfolio manager.

(3) These Shares are owned by investment clients of Ancora Advisors, LLC and include, if applicable, Shares owned by investment clients of the other Ancora RIAs. The Ancora RIAs do not own these Shares directly, but by virtue of the investment management agreements between the Ancora RIAs and their investment clients, each Ancora RIA may be deemed to beneficially own Shares by reason of its power to vote and or dispose of such Shares. Each applicable Ancora RIA disclaims beneficial ownership of such Shares. The transactions in the Shares by the Reporting Persons since the last filing are set forth in Exhibit 99.1 and are incorporated herein by reference. No person other than the persons referenced herein is known to have the right to receive, or the power to direct the receipt of dividends from, or proceeds from the sale of, the Shares.

Item 6. Contracts, Arrangements, Understandings, or Relationships with Respect to Securities of the Issuer.

The Reporting Person has entered into cash-settled swaps which represent economic exposure comparable to shares of Class A Common Stock. Under the terms of the swaps, (i) the Investment Vehicle will be obligated to pay to the counterparty any negative price performance of the specified notional number of shares of Class A Common Stock subject to the swaps as of the expiration date of such swaps, plus interest rates set forth in the applicable contracts, and (ii) the counterparty will be obligated to pay the Investment Vehicle any positive price performance of the specified notional number of shares of Class A Common Stock subject to the swaps as of the expiration date of the swaps. All balances will be settled in cash. The Reporting Person’s counterparty for the swaps is Jefferies.

The swaps do not give the Reporting Person or the Investment Vehicles direct or indirect voting, investment or dispositive control over any securities of the Issuer and do not require the counterparty thereto to acquire, hold, vote or dispose of any securities of the Issuer. Accordingly, the Reporting Persons disclaim any beneficial ownership of any shares of Class A Common Stock that may be referenced in the swap contracts or shares of Class A Common Stock or other securities or financial instruments that may be held from time to time by any counterparty to the contracts.

Item 7. Material to be Filed as Exhibits.

Exhibit 99.1. Relevant Transactions in Shares Since Last Filing.

Date of Transaction	Buy/Sell	Amount of Security	Price Per Shares
04/03/2019	BUY	7,746	$10.01

Exhibit 99.2. Letter from Ancora to Board of Directors of the Issuer

SIGNATURES

After reasonable inquiry and to the best of his knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct.

Dated: April 8, 2019

Ancora Advisors, LLC
By:	/s/ Frederick DiSanto
	Name:	Frederick DiSanto
	Title:	Chairman and Chief Executive Officer

EX-99.2

 

April 8, 2019

Sent via email

Board of Directors

J. Alexander’s Holdings, Inc.

3401 West End Avenue, Suite 260

Nashville, Tennessee 37203

Dear Members of the Board:

Ancora Advisors LLC is a significant shareholder of J. Alexander’s Holdings, Inc. (the “Company”, “J. Alexander’s”, or “JAX”), currently holding 1,261,810 shares of common stock, or approximately 8.6% of the shares outstanding. Today, Ancora Advisors LLC is proposing to acquire J. Alexander’s for $11.75 per share in cash, a 24% premium to the unaffected share price prior to our 13D filing on March 12, 2019. This preliminary, non-binding acquisition proposal (the “Proposal”) is outlined below. The Proposal provides a premium value and liquidity to shareholders that have suffered persistent underperformance driven by a management and board of directors that operate JAX without regard for outside shareholders.

JAX’s severe underperformance is most evident in the substantial discount the shares trade at relative to its closest restaurant peers (JAX currently trades at 5.7x 2019 EV / EBITDA¹ vs. peer group² median of 9.9x EBITDA). This discount is even more pronounced when considering that J. Alexander’s owns nearly 40% of its real estate. Adjusting for our estimate of the value of the owned real estate, JAX trades at 4.2x 2019 EV / EBITDA.

($ in mm, except per share)							SSS		Unit Growth		EV/EBITDA
		Market	Net			EBITDA
Company	Price	Cap	Debt	TEV	Leverage	margin	2018	2019	2018	2019	2018	2019
J. Alexander's Holdings, Inc.	$9.82	$144	$6	$157	0.2x	10.6%	1.9%	1.5%	4.5%	4.3%	6.1x	5.7x
Ruth's Hospitality Group, Inc.	25.59	776	36	812	0.5	17.5%	(1.4%)	1.4%	(24.7%)	3.4%	10.2	9.7
Del Frisco's Restaurant Group, Inc.	6.41	214	324	538	9.2	9.3%	(0.9%)	1.0%	40.4%	9.9%	15.2	9.3
Cheesecake Factory Incorporated	48.92	2,207	97	2,304	0.4	10.1%	1.7%	1.5%	1.0%	19.5%	9.8	9.5
Chuy's Holdings, Inc.	22.77	384	(8)	376	(0.2)	9.3%	0.5%	2.0%	9.9%	4.0%	10.1	9.7
Texas Roadhouse, Inc.	62.19	4,458	(208)	4,250	(0.7)	12.8%	5.4%	4.9%	6.0%	6.2%	13.5	12.1
Bloomin' Brands, Inc.	20.45	1,874	996	2,870	2.5	9.6%	2.5%	2.0%	0.1%	0.8%	7.2	6.9
BJ's Restaurants, Inc.	47.28	997	66	1,062	0.5	11.8%	5.3%	2.4%	2.5%	3.9%	8.0	8.1
Darden Restaurants, Inc.	121.47	14,938	947	15,884	0.8	13.8%	2.3%	2.8%	3.0%	2.7%	14.3	13.3
Cracker Barrel Old Country Store, Inc.	161.61	3,885	285	4,171	0.7	12.8%	0.6%	2.0%	1.7%	0.9%	10.8	10.8
Average		$3,304	$282	$3,585	1.5x	11.9%	1.8%	2.2%	4.4%	5.7%	11.0x	9.9x
Median		$1,874	$97	$2,304	0.5x	11.8%	1.7%	2.0%	2.5%	3.9%	10.2x	9.7x
JAX +/- median		($1,730)	($90)	($2,147)	-0.3x	(1.3%)	0.2%	(0.5%)	2.0%	0.4%	-4.1x	-4.0x

Souce: FactSet, Company Filings

Prices as of market close 3/29/2019 

________________________________

¹ Based on the mid-point of JAX 2019 EBITDA guidance

² Peer group: RUTH, DFRG, CAKE, CHUY, TXRH, BLMN, BJRI, DRI, CBRL

J. Alexander’s Underperformance

Since returning to the public markets in September 2015, J. Alexander’s has generated growth in revenue of 14% and operating cash flow of 25%³, but today’s share price is 15% below the price at the time of the spin-off. Same-store sales have been positive in 11 of 13 quarters at J. Alexander’s/Grills and 12 of 13 quarters at Stoney River. Despite these operating results, Total Shareholder Returns (“TSR”) over this period have been terrible, largely due to management / board decisions that have been highly unfriendly to shareholders.

	1-Year	3-Year	Since Spin-Off
JAX	1.0%	(3.2%)	(0.4%)
RUTH	16.3%	17.8%	15.9%
DFRG	(50.0%)	(24.6%)	(19.8%)
CAKE	3.8%	4.0%	(0.7%)
CHUY	(15.4%)	(9.4%)	(6.1%)
TXRH	16.1%	20.6%	17.8%
BLMN	(1.7%)	7.8%	5.1%
BJRI	24.3%	3.1%	3.1%
DRI	24.1%	25.7%	25.3%
CBRL	6.5%	13.4%	7.9%
Selected Peers Median	6.5%	7.8%	5.1%
Source: FactSet, ISS
TSR measurement through 3/29/19

We believe the primary reasons for J. Alexander’s poor TSR and severely discounted valuation are the following:

1. The Black Knight Advisory Services (“BKAS”) consulting agreement resulted in material outflows of shareholder capital and created a perception of self-dealing and a board severely lacking independence.

2. The misguided 99 Restaurants transaction further exacerbated shareholders’ distrust that management and the board could strategically deploy capital to generate value.

3. J. Alexander’s lack of scale and limited liquidity result in the Company being ill-suited as an independent public company.

Management Agreement

As part of the spin-off from Fidelity National Financial, Inc. (“FNF”), JAX entered into a management consulting agreement with BKAS, the principal member of which is William P. Foley II, the Chairman of FNF and Cannae Holdings (“Cannae”), that allowed FNF and management to continue to skim more value for themselves at the expense of shareholders. Other BKAS members consisted of various officers of Cannae and FNF, as well as current JAX CEO Lonnie Stout II, who owned an 11.8% interest in BKAS. Under the agreement, JAX was required to pay BKAS an annual fee equal to 3% of its annual Adjusted EBITDA and awarded BKAS Class B Units (exchangeable into JAX common stock when fully vested) as a profits interest grant. In return for these generous rewards, BKAS was to provide JAX with “corporate and strategic” advisory services.

Including a $4.56 million payment upon termination of the deal, BKAS reaped more than $7 million from JAX over the life of the agreement, while JAX public shareholders have been left with losses on their investment. The notion of a fully compensated CEO also participating in a shareholder-funded management consulting agreement seems questionable at best and rife with conflicts of interest.

________________________________

³ Growth based on 2018 numbers relative to 9/30/15 LTM numbers

The 99 Restaurants Transaction

In August 2017, J. Alexander’s announced its intention to acquire Ninety Nine Restaurants. “99” is a casual dining concept owned by Fidelity Newport Holdings (“FNH”), a majority-owned subsidiary of Fidelity National Financial Ventures (“FNFV”), which in turn was a direct wholly-owned subsidiary of FNF. This proposed “acquisition” would have seen JAX’s public shareholders relinquish control of the Company for $11.00 per share, a mere 9% premium to the pre-announced closing price^[4]. The proposed 99 transaction was riddled with conflicts of interest:

· JAX Director Timothy Janszen is the CEO of Newport Global Advisors, a private equity fund with a 30.3% economic interest in 99 Restaurants^[5]. In the proposed transaction, Newport would have received new JAX equity worth $54.3 million. To put this in perspective, the total value of JAX equity ownership by all other JAX directors and executives was only $6.4 million.

· Board Chairman Frank Martire and director Ronald Maggard, Sr. also served on the board of FNH, before resigning on the exact same day the transaction was announced.

· CEO Lonnie Stout II owned an 11.8% interest in BKAS, which presumably would have entitled him to that share of the $2.09 million termination fee BKAS would have received as well as the 406,000 shares expected to be issued to BKAS in exchange for its profits interest units.

· JAX agreed to subject itself to a no shop restriction, despite the fact that JAX was supposed to be the buyer in this transaction. Considering the Board’s extensive ties to FNF and FNH, it is impossible to see an angle where this decision served the interests of JAX shareholders rather than the interests of FNF and FNH.

This transaction proved without a doubt that management and the board were more interested in self-dealing than looking out for the interests of JAX’s public shareholders.

Ill-Suited as an Independent Public Company

We believe the best path forward for J. Alexander’s is as a private company. JAX management itself has acknowledged that its growth and liquidity profile are unfit for public markets, and used that as part of its rationale for the 99 transaction. From its definitive proxy statement for the 99 transaction: “The Transactions represent an opportunity to increase the scale of the Company’s operations to better spread public company costs and management costs and that future increased equity float of the Company may attract additional equity analyst coverage, additional investor interest and future liquidity for Class A common stock”.

In our view, JAX will continue to be undervalued as a public company given its lack of scale, growth and liquidity. With a restaurant base of 48 units, JAX is simply too small to effectively leverage its corporate overhead and public company costs. JAX has averaged 1.25 new unit openings per year since 2015. We do not believe that this limited pace of growth requires JAX to access public capital to fund expansion. Furthermore, JAX trades roughly $500,000 of volume on a daily basis vs. $5.5 million for the median stock in the Russell 2000, making it very difficult for investors to build a meaningful position in the Company.

We are strongly opposed to the Company attempting to justify its existence as a public entity through strategic acquisitions. The Company has no currency to do this and, at its current multiple, deals will most certainly be highly dilutive to shareholders. In our view, the only viable manner for shareholders to achieve full and fair valuation is a sale of the business.

________________________________

⁴ JAX was to pay total consideration of $199 million, consisting of $20 million of assumed debt and $179 million of newly issued Class B equity valued at $11.00 per share. Class B equity was to represent 52.5% of the outstanding shares of the post-transaction entity

⁵ Newport owned 38.9% of FNH, which in turn owned 78.0% of 99 at the time of the deal

Details on Proposal and Financing

To this end, Ancora proposes to acquire J. Alexander’s for $11.75 per share in cash for 100% of the outstanding shares of the Company, representing an enterprise value of approximately $186 million. Our Proposal represents a premium of 24% over the unaffected closing stock price the day prior to the filing of Ancora’s Schedule 13D on March 12, 2019. We believe this Proposal represents a compelling, premium value and opportunity for liquidity to shareholders.

We expect that we would finance the acquisition and related fees and expenses with a combination of cash equity invested by Ancora and our affiliates and debt financing from third-party lenders. In addition to rolling Ancora’s existing ownership of JAX, Ancora will seek to secure third-party debt financing, and we have engaged in initial discussions with potential lenders and believe leverage required to finance our Proposal is highly achievable. We have received preliminary financing indications from these lenders and are highly confident that we will have fully committed financing.

The equity necessary to complete the acquisition would be funded by Ancora’s investment partnerships and other affiliates of Ancora. We have $6.5 billion of assets under management. We have discretionary authority over $4.1 billion of client assets, this constitutes a considerable amount of access to capital to consummate the acquisition.

Lastly, this Proposal is not intended to be legally binding and is subject to, among other things, the negotiation and execution of a mutually satisfactory definitive acquisition agreement containing provisions customary for transactions of this type and size, receipt of regulatory approvals, and satisfactory completion of our due diligence.

Due Diligence Requirements

We believe we can complete our confirmatory due diligence in an expedited manner if we are provided appropriate information and access to management. Given our familiarity with the Company through our extensive public diligence to date, our diligence will be highly targeted.

Prior to the execution of a definitive purchase agreement, we would anticipate completion of the following activities: (i) customary company and financial diligence, including reviews of historical and future prospects for the business; (ii) engaging a leading accounting firm to conduct a confirmatory accounting and tax review; (iii) completion of confirmatory legal due diligence by our legal counsel; and (iv) further evaluation of the Company’s owned real estate and leases. We have the ability to consummate the transaction on an accelerated basis, and we are prepared to immediately engage in a due diligence review of the Company.

Next Steps

We want to thank the Board for considering this Proposal. We would like to schedule a meeting with both the Board and senior management at your earliest convenience to discuss the Proposal. We are eager to move ahead by signing an NDA and commencing diligence.

Sincerely,

 

Fred DiSanto

Chief Executive Officer and Executive Chairman

Ancora Advisors LLC