SCHEDULE 14A (RULE 14A-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ) Filed by the Registrant / / Filed by a Party other than the Registrant /X/ Check the appropriate box: / / Preliminary Proxy Statement / / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) / / Definitive Proxy Statement / / Definitive Additional Materials /X/ Soliciting Material Under Rule 14a-12 BKF CAPITAL GROUP, INC. - -------------------------------------------------------------------------------- (Name of Registrant as Specified in Its Charter) STEEL PARTNERS II, L.P. STEEL PARTNERS, L.L.C. WARREN G. LICHTENSTEIN - -------------------------------------------------------------------------------- (Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant) Payment of Filing Fee (Check the appropriate box): /X/ No fee required. / / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: - -------------------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: - --------------------------------------------------------------------------------(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): - -------------------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: - -------------------------------------------------------------------------------- (5) Total fee paid: - -------------------------------------------------------------------------------- / / Fee paid previously with preliminary materials: - -------------------------------------------------------------------------------- / / Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. (1) Amount previously paid: - -------------------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: - -------------------------------------------------------------------------------- (3) Filing Party: - -------------------------------------------------------------------------------- (4) Date Filed: -2- Steel Partners II, L.P. ("Steel"), together with the other participants named herein, is filing materials contained in this Schedule 14A with the Securities and Exchange Commission in connection with a possible preliminary filing with the SEC of a proxy statement and accompanying proxy card to be used to solicit votes for approval of its proposal to declassify the composition of Board of Directors at the 2005 annual meeting of stockholders of BKF Capital Group, Inc., a Delaware corporation (the "Company"), which has not yet been scheduled. Item 1: On December 16, 2004, Steel issued the following press release announcing that it has delivered a letter to the Board of Directors of the Company. FOR ADDITIONAL INFORMATION, PLEASE CONTACT: Media: Sitrick And Company Investors: Morrow & Co., Inc. Los Angeles Mike Verrechia Michael Sitrick (800) 654-2468 Terry Fahn steel.info@morrowco.com (310) 788-2850 New York Jeff Lloyd (212) 573-6100 FOR IMMEDIATE RELEASE STEEL PARTNERS ASKS BOARD OF BKF CAPITAL GROUP TO REDEEM POISON PILL, USE EXCESS CASH TO UP DIVIDEND AND BUY BACK STOCK, ADD REPRESENTATIVES OF INSTITUTIONAL STOCKHOLDERS TO BOARD STEEL PARTNERS SAYS BOARD NEEDS TO IMPROVE OPERATING PROFITS AND REDUCE EXPENSES NEW YORK, NY - DECEMBER, 16, 2004 -- Steel Partners II, L.P. ("Steel Partners"), which owns an aggregate of 657,000 shares or approximately 9.3% of common stock of BKF Capital Group, Inc. (NYSE:BKF) today sent a letter to the BKF Board of Directors asking the Board to implement certain governance and operational changes including: o Immediately add three representatives of the BKF's institutional stockholders to the Company's Board; o Redeem its "poison pill"; o Support Steel Partners' proposal at the upcoming annual meeting of stockholders to "destagger" the Board and elect all directors annually; o Use BKF's excess cash to increase its dividend and to repurchase stock aggressively; o Appoint an operating officer who will reduce expenses and improve operating performance. "The large number of votes withheld for incumbent directors at the last annual meeting is evidence that a significant number of stockholders have lost confidence in the Board," Steel Partners said. "Over the past several months, we privately reached out to individual members of the Board of Directors to discuss our concerns regarding BKF's compensation arrangements, its failure to control administrative expenses, its disappointing financial performance and its failure to enact much needed corporate governance reforms," Steel Partners wrote. "Unfortunately, our concerns have fallen on deaf ears. Therefore, in order to protect and enhance our investment in the Company we believe that we have no choice but to communicate our concerns directly to the entire Board of Directors in the hope that the Board will promptly implement meaningful steps to enhance stockholder value and adopt modern-day corporate governance standards." Steel Partners continued, "As we have repeatedly communicated to several of you individually, we have significant concerns about the Company's ability to implement a business plan that will promptly return the Company to profitability for the benefit of all stockholders. Although we believe that John A. Levin & Co. has and continues to serve its clients well, BKF has failed to deliver value to its owners. Frankly, we do not understand how a money management company that manages approximately $13 billion of assets and has over $100 million in revenues can lose money ... Perhaps what is most startling is when one compares BKF's financial metrics to those of other publicly-traded money managers. Even a cursory glance at these figures demonstrates that changes are needed to deliver reasonable value to the Company's stockholders." Steel Partners added, "[W]e believe that BKF must adopt compensation arrangements that reward its key employees for performance and align their interests directly with BKF's clients and stockholders. Based on our observation of the long term performance of BKF, we are concerned that BKF's Board runs the Company as if it were a private company that is not accountable to its stockholders." Steel Partners also stated in the letter that BKF needs to immediately implement corporate governance changes and suggested various steps the Board could take to improve corporate governance standards. Steel Partners said in its letter that the Board should repeal certain devices that impede responsible corporate governance and is clearly out of touch with today's changing corporate governance standards. "Philosophically, Steel Partners believes that diplomacy is a better strategy and that a contested election is always a last resort. While we have tried to express our concerns privately with the hope of resolving our differences, it appears that we are at an impasse. We sincerely hope to avoid the cost and disruption of a contested election at the upcoming annual meeting and prefer that the Board voluntarily implement or propose the requested corporate governance reforms, provide us with the necessary permission to communicate with other stockholders and reconstitute its Board. Steel Partners concluded by stating, "To be clear, our goal is simple and straightforward - to promptly and immediately increase value for ALL of BKF's stockholders." THE TEXT OF THE LETTER FROM STEEL PARTNERS TO THE BKF BOARD FOLLOWS: STEEL PARTNERS II, L.P. 590 MADISON AVENUE 32ND FLOOR NEW YORK, NEW YORK 10022 ------ TEL (212) 758-3232 FAX (212) 758-5789 December 16, 2004 Board of Directors BKF Capital Group, Inc. One Rockefeller Plaza New York, NY 10020 Gentlemen: As you know, Steel Partners II, L.P. ("Steel Partners") is a significant stockholder of BKF Capital Group, Inc. ("BKF" or the "Company"). We own an aggregate of 657,000 shares of common stock (or approximately 9.3%) of the Company. Over the past several months, we have privately reached out to individual members of the Board of Directors to discuss our concerns regarding BKF's compensation arrangements, its failure to control administrative expenses, its disappointing financial performance and its failure to enact much needed corporate governance reforms. Unfortunately, our concerns have fallen on deaf ears. Therefore, in order to protect and enhance our investment in the Company, we believe that we have no choice but to communicate our concerns directly to the entire Board of Directors in the hope that the Board will promptly implement meaningful steps to enhance stockholder value and adopt modern-day corporate governance standards. As we have repeatedly communicated to several of you individually, we have significant concerns about the Company's ability to IMPLEMENT A BUSINESS PLAN THAT WILL PROMPTLY RETURN THE COMPANY TO PROFITABILITY for the benefit of all stockholders. Although we believe that John A. Levin & Co. has and continues to serve its clients well, BKF has failed to deliver value to its owners. Frankly, we do not understand how a money management company that manages approximately $13 billion of assets and has over $100 million of revenues can lose money. BKF has net losses for the nine months ended September 30, 2004 of approximately $3.5 million and approximately $8.4 million and $2.5 million for the years ended December 31, 2003 and 2002, respectively. Perhaps what is most startling is when one compares BKF's financial metrics to those of other publicly-traded money managers. Even a cursory glance at these figures demonstrates that changes are needed to deliver reasonable value to the Company's stockholders. Twelve Months Ended September 30, 2004 -------------------------------------- Operating Income as a Percentage Revenues Operating Income of Revenues Return on Equity -------- ---------------- ----------- ---------------- (dollars in millions) Affiliated Managers Group Inc. $616 $251 40.75% 13.1% Eaton Vance Corp.(1) $662 $223 33.69% 32.1% Gabelli Asset Management Inc. $243 $94 38.68% 15.8% Nuveen Investments Inc. $495 $262 52.93% 32.1% Waddell & Reed Financial Inc. $498 $176 35.34% 56.3% BKF Capital Group Inc. $109 $4 3.67% (5.7)% (1) All figures for Eaton Vance Corp. are for the twelve months ended October 31, 2004. These results are not a one year aberration. BKF's financial performance has consistently lagged behind these industry financial metrics for years. WE BELIEVE THAT THE BOARD'S FAILURE TO ENACT APPROPRIATE COMPENSATION ARRANGEMENTS BETWEEN BKF AND ITS INVESTMENT PROFESSIONALS AND ITS FAILURE TO CONTROL ADMINISTRATIVE EXPENSES ARE SOME OF THE PRIMARY REASONS FOR BKF'S DISMAL OPERATING PERFORMANCE. As we have previously stated, we believe that BKF must adopt compensation arrangements that reward its key employees for performance and align their interests directly with BKF's clients and stockholders. Based on our observation of the long term performance of BKF, we are concerned that BKF's Board runs the Company as if it were a private company that is not accountable to its stockholders. Therefore, we request that BKF voluntarily comply with the attached request to inspect certain of its books and records as set forth in Exhibit "A" attached hereto. BKF NEEDS TO IMMEDIATELY IMPLEMENT MODERN-DAY CORPORATE GOVERNANCE AND OPERATIONAL CHANGES We believe that the Board should repeal certain devices that impede responsible corporate governance and is clearly out of touch with today's changing corporate governance standards. Additionally, we believe the Company needs to utilize its excess cash to immediately return value to its stockholders. Accordingly, we encourage the Board to: o REDEEM ITS "POISON PILL", which was implemented without stockholder approval. At each of the last three annual meetings, stockholder proposals to redeem the poison pill have been approved by stockholders, yet this Board has failed to act. Of the votes cast on this proposal at the last three annual meetings, approximately 65.7%, 76.9% and 66.1% in 2004, 2003 and 2002, respectively, voted in favor of redeeming the poison pill. How can you continue to ignore the vote of the owners? o SUPPORT OUR PROPOSAL AT THE UPCOMING ANNUAL MEETING OF STOCKHOLDERS TO "DESTAGGER" THE BOARD AND ELECT ALL DIRECTORS ANNUALLY. The classification of BKF's Board in our opinion reduces accountability and is an unnecessary anti-takeover device. Annual accountability will make the Company's Board more closely focus on the performance of BKF's executives and on maximizing stockholder value. o USE EXCESS CASH TO INCREASE ITS DIVIDEND AND TO REPURCHASE STOCK AGGRESSIVELY. Despite the disappointing financial performance of the Company, we continue to believe that the Company's common stock is undervalued. As of September 30, 2004, the Company had approximately $59.6 million in cash and cash equivalents and no debt. We believe the Company could easily increase its annual dividend or begin a massive share buyback, which we believe is a fundamentally sound method to increase long-term stockholder value and an effective use of the Company's excess cash. o ELIMINATE FROM THE COMPANY'S CERTIFICATE OF INCORPORATION THE SUPER-MAJORITY APPROVAL REQUIREMENT TO REMOVE DIRECTORS AND FOR STOCKHOLDER APPROVAL OF MERGERS, SALES OR LIQUIDATIONS NOT PREVIOUSLY APPROVED BY AT LEAST TWO-THIRDS OF THE WHOLE BOARD. The Company's certificate of incorporation currently requires the approval of holders of at least 80% of the shares entitled to vote to take such actions. The Company should act according to the will of the holders of a majority of its outstanding stock and not allow a minority to dictate to the majority. o APPOINT AN OPERATING OFFICER WHO WILL REDUCE EXPENSES AND IMPROVE OPERATING PERFORMANCE. While we are appreciative of the historical contribution of John Levin, we believe the Company could better leverage Mr. Levin's investment acumen by appointing him the chief investment officer of the Company. BKF would benefit from the appointment of a seasoned operating officer who could bring the Company's bottom-line performance in line with its peers. o AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION AND BY-LAWS TO ALLOW THE STOCKHOLDERS TO ACT BY WRITTEN CONSENT AND TO CALL "SPECIAL MEETINGS OF STOCKHOLDERS". This Company's Board must know that its actions or failures to act will have consequences and that they can and will be held accountable. Based upon the large number of votes withheld for the election of the incumbent directors at last year's annual meeting (approximately 1.86 million shares), it is apparent to us that a significant number of stockholders of BKF have lost confidence in the Board's ability to improve stockholder value. We therefore request that three representatives of the Company's institutional stockholders be immediately added to the Board. We request the Board's permission to communicate with other existing institutional stockholders about serving on the Company's Board without triggering BKF's "poison pill" so that we can obtain a consensus with the other institutional stockholders on appropriate candidates. We believe that there will be strong support for this proposal. Philosophically, Steel Partners believes that diplomacy is a better strategy and that a contested election is always a last resort. While we have tried to express our concerns privately with the hope of resolving our differences, it appears that we are at an impasse. We sincerely hope to avoid the cost and disruption of a contested election at the upcoming annual meeting and prefer that the Board voluntarily implement or propose the requested corporate governance reforms, provide us with the necessary permission to communicate with other stockholders and reconstitute its Board. We also hope that the Board will voluntarily provide us with the limited information we have requested (which we as a stockholder have the right to review). TO BE CLEAR, OUR GOAL IS SIMPLE AND STRAIGHTFORWARD - TO PROMPTLY AND IMMEDIATELY INCREASE VALUE FOR ALL OF BKF'S STOCKHOLDERS. As always, we stand ready to meet with the Board of Directors and its representatives as soon as possible. We, of course, reserve all rights to take any and all action Steel Partners deems necessary to protect its investment in the Company should BKF's Board continue to ignore our concerns. Very truly yours, STEEL PARTNERS II, L.P. By: Steel Partners, L.L.C. Its: General Partner By: /s/ Warren G. Lichtenstein ------------------------------ Name: Warren G. Lichtenstein Title: Managing Member EXHIBIT "A" ----------- 1. All records, agreements, reports, notes, writings, correspondence or the like that will allow Steel to determine the salaries, fees, bonuses and other compensation paid currently and paid during each of the past five fiscal years by the Company or any of its subsidiaries to any investment professionals, managers, employees, officers, advisors, affiliates and other parties in connection with the management of any private investment vehicles of which John A. Levin & Co. and/or Levin Management Co., Inc. or any related person or entity directly or indirectly serves or has served as an advisor or in which such party has an equity or profits interest. 2. All minutes of meetings and/or resolutions of the Company's or any of its subsidiaries' Board of Directors or Committees to the Board of Directors relating to salaries, fees, bonuses and other compensation paid currently and paid during each of the past five fiscal years by the Company or any of its subsidiaries to any investment professionals, managers, employees, officers, advisors, affiliates and other parties in connection with the management of any private investment vehicles of which John A. Levin & Co. and/or Levin Management Co., Inc. or any related person or entity directly or indirectly serves or has served as an advisor or in which such party has an equity or profits interest. 3. All records, agreements, reports, notes, writings, correspondence or the like reviewed by the Company's or any of its subsidiaries' Board of Directors or Committees to the Board of Directors in approving salaries, fees, bonuses and other compensation paid currently and paid during each of the past five fiscal years by the Company or any of its subsidiaries to any investment professionals, managers, employees, officers, advisors, affiliates and other parties in connection with the management of any private investment vehicles of which John A. Levin & Co. and/or Levin Management Co., Inc. or any related person or entity directly or indirectly serves or has served as an advisor or in which such party has an equity or profits interest. 4. All reports, notes, writings, correspondence or the like prepared or furnished by third-party consultants or other advisors to the Company evaluating salaries, fees, bonuses and other compensation paid (or proposed to be paid) currently and paid (or proposed to be paid) during each of the past five fiscal years by the Company or any of its subsidiaries to any investment professionals, managers, employees, officers, advisors, affiliates and other parties in connection with the management of any private investment vehicles of which John A. Levin & Co. and/or Levin Management Co., Inc. or any related person or entity directly or indirectly serves or has served as an advisor or in which such party has an equity or profits interest. CERTAIN INFORMATION CONCERNING PARTICIPANTS Steel Partners II, L.P. ("Steel Partners"), together with the other Participants (as defined below), may make a preliminary filing with the Securities and Exchange Commission ("SEC") of a proxy statement and accompanying proxy card to be used to solicit votes for approval of its proposal to "destagger" the Board at the 2005 annual meeting of stockholders of BKF Capital Group, Inc., a Delaware corporation (the "Company"), which has not yet been scheduled. IN THE EVENT THAT A DETERMINATION IS MADE TO FILE A PROXY STATEMENT WITH THE SEC, STEEL PARTNERS STRONGLY ADVISES ALL STOCKHOLDERS OF THE COMPANY TO READ THE PROXY STATEMENT WHEN IT IS AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. SUCH PROXY STATEMENT, IF FILED, WILL BE AVAILABLE AT NO CHARGE ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS IN ANY SOLICITATION WILL PROVIDE COPIES OF THE PROXY STATEMENT, IF FILED, WITHOUT CHARGE UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS' PROXY SOLICITOR, MORROW & CO., INC., AT ITS TOLL-FREE NUMBER: (800) 654-2468 OR E-MAIL: STEEL.INFO@MORROWCO.COM. The participants in such potential proxy solicitation are anticipated to be Steel Partners, Steel Partners, L.L.C. and Warren G. Lichtenstein (collectively, the "Participants"). Information regarding the Participants and their direct or indirect interests is available in their Schedule 13D, as amended, jointly filed with the SEC.
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DFAN14A Filing
Steel Partners Ii Inactive DFAN14AAdditional proxy materials by non-management
Filed: 16 Dec 04, 12:00am