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.
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(Name of Registrant as Specified in Its Charter)
STEEL PARTNERS II, L.P.
STEEL PARTNERS, L.L.C.
WARREN G. LICHTENSTEIN
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(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
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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
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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"
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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.
