UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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/
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/ / Preliminary Proxy Statement
/ / Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/x/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-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
RONALD LABOW
KURT SCHACHT
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-2-
Steel Partners II, L.P. ("Steel") is filing materials contained in
this Schedule 14A with the Securities and Exchange Commission in connection with
the solicitation of proxies in support of the election of the nominees of Steel
to the Board of Directors of BKF Capital Group, Inc. (the "Company") and other
business proposals at the 2005 annual meeting of the stockholders of the Company
scheduled to be held on June 23, 2005, or any other meeting of stockholders held
in lieu thereof, and any adjournments, postponements, reschedulings or
continuations thereof (the "Annual Meeting").
Item 1: On June 9, 2005, Steel issued the following press release,
including a letter to the Company's stockholders, regarding the Annual Meeting.
FOR ADDITIONAL INFORMATION, PLEASE CONTACT:
Media: Sitrick And Company Investors: Morrow & Co., Inc.
New York John Ferguson
Mike Sitrick (800) 654-2468
Jeff Lloyd steel.info@morrowco.com
(212) 573-6100
Los Angeles
Terry Fahn
(310) 788-2850
FOR IMMEDIATE RELEASE
STEEL PARTNERS SAYS REAL ISSUE CONFRONTING BKF'S
SHAREHOLDERS IS BKF'S DISMAL PERFORMANCE AND FAILURE TO
ALIGN COMPENSATION WITH SHAREHOLDER INTERESTS
NEW YORK, NY - JUNE 9, 2005 -- Steel Partners II, L.P. today called the
last-minute postponement of BKF Capital Group's (NYSE: BKF) 2005 Annual Meeting
a thinly-veiled attempt to cloud the real issues in the election of corporate
directors, namely the Company's miserable operating performance and failure to
tie compensation with the interests of shareholders.
"While we welcome the admission by this Board into the modern world of corporate
governance through the sudden adoption of corporate governance measures, the
issue of the Company's continuing substandard financial performance still
remains of paramount concern," said Warren G. Lichtenstein, the managing member
of Steel Partners.
"The fact that the Board has once again attempted to get by with as little as
possible to maintain the status quo, we believe, more than ever demonstrates the
need for BKF's shareholders to elect independent directors who will adopt a real
plan for cutting expenses, aligning compensation with shareholders' interests,
and eliminating related party transactions, all with the objective of enhancing
profitability," he stated.
In the attached letter that is being sent to all BKF shareholders, Steel
Partners documents how BKF's performance has been unacceptable, compared to its
peers. And yet, despite this miserable performance, BKF continues to generously
reward its senior management and, on June 1, 2005, it granted golden parachutes
to its General Counsel and Chief Financial Officer.
Commenting on the corporate governance changes that were suddenly announced by
BKF, Mr. Lichtenstein said, "The fact that BKF has belatedly adopted many of the
proposals and positions that we advocated much earlier demonstrates that Steel's
advocacy is already yielding benefits for the Company's shareholders. We believe
that BKF has wasted corporate assets by resisting these corporate governance
initiatives and then suddenly reversing its position and adopting these
initiatives one day before the Annual Meeting."
SHAREHOLDERS ARE URGED TO VOTE THE GOLD PROXY CARD FOR STEEL PARTNERS' THREE
INDEPENDENT NOMINEES AND FOR EACH OF THE BUSINESS PROPOSALS DESCRIBED IN ITS
PROXY STATEMENT.
SHAREHOLDERS OF BKF ARE ADVISED TO READ THE DEFINITIVE PROXY STATEMENT AND OTHER
DOCUMENTS RELATED TO THE SOLICITATION OF PROXIES BY STEEL PARTNERS II, L.P. AND
THE OTHER PARTICIPANTS IN THE SOLICITATION FOR USE AT BKF'S ANNUAL MEETING
SCHEDULED TO BE HELD ON JUNE 23, 2005. THE DEFINITIVE PROXY STATEMENT IS
AVAILABLE AT NO CHARGE AT THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
WWW.SEC.GOV OR BY CALLING MORROW & CO., INC., TOLL FREE AT (800) 607-0088.
THE TEXT OF THE LETTER FROM STEEL PARTNERS TO THE BKF SHAREHOLDERS FOLLOWS:
A CRITICAL MESSAGE
TO
BKF CAPITAL GROUP, INC. STOCKHOLDERS
FROM
STEEL PARTNERS II, L.P.
DO NOT LET BKF'S LAST MINUTE FLIP-FLOP ON CORPORATE GOVERNANCE REFORMS CONFUSE
THE REAL ISSUE AT THE 2005 ANNUAL MEETING - BKF HAS FAILED TO ADDRESS ITS
DISMAL OPERATING PERFORMANCE AND ALIGN COMPENSATION WITH STOCKHOLDER INTERESTS
June 9, 2005
Fellow Stockholders:
Steel Partners II, L.P. has previously written to you seeking your support at
the 2005 Annual Meeting of BKF Capital Group, Inc. We are now writing in
response to BKF's disturbing, last-minute postponement of the Annual Meeting
originally scheduled to be held on June 9, 2005. Just one day before the Annual
Meeting, BKF announced that the Board of Directors had suddenly adopted
corporate governance changes that it had previously failed to address despite
repeated stockholder demands. The Board has postponed the Annual Meeting to
purportedly allow stockholders more time to consider the election of directors.
We can only speculate as to their true motives in delaying the Annual Meeting
and adopting last minute corporate governance reforms. WOULD ANY OF THESE
CORPORATE GOVERNANCE REFORMS HAVE BEEN ADOPTED WITHOUT STEEL PARTNERS COMMENCING
ITS PROXY CONTEST?
YOUR SUPPORT FOR OUR NOMINEES IS ESSENTIAL IN ORDER TO CONTINUE TO HOLD BKF
AND ITS BOARD ACCOUNTABLE.
Due to your support for our nominees and the corporate governance initiatives
that we are advocating, BKF's Board has been dragged kicking and screaming,
against their will, into the modern world of corporate governance reform.
BKF's Board is telling you that they are making these changes at the last minute
due to some recent conversations with stockholders. If they had listened earlier
to some of their largest stockholders, including Steel Partners, they may have
been able to make significant changes without a proxy contest. We believe that
BKF wasted corporate assets by fighting these corporate governance initiatives
and then suddenly reversing its position and adopting these initiatives one day
before the Annual Meeting.
The Board stated that we don't have a business plan. We believe the real story
is they simply don't want three independent directors on their board who will
press them to adopt a real plan for cutting expenses, aligning compensation with
stockholders' interests, and eliminating related party transactions, all with
the objective of enhancing profitability. WE BELIEVE THEY DON'T WANT ANYONE ON
THEIR BOARD THAT WILL MAKE THEM TOE THE LINE IN ORDER TO ENHANCE THE BOTTOM
LINE.
The fact that BKF has belatedly adopted many of our proposals and positions that
we advocated much earlier we believe demonstrates that our advocacy is already
yielding benefits for BKF's stockholders. THERE IS STILL MORE TO BE
ACCOMPLISHED.
BKF'S BOARD STILL DOES NOT UNDERSTAND THAT THE MAIN ISSUES IN THIS ELECTION
CONTEST ARE IMPROVING OPERATING PERFORMANCE AND ALIGNING COMPENSATION WITH
STOCKHOLDER INTERESTS!
WHY IS BKF'S BOARD UNWILLING TO TIE COMPENSATION TO PERFORMANCE?
We believe it is clear from the timing of BKF's June 8 announcement that the
corporate governance reforms were adopted as a desperate measure to delay the
2005 Annual Meeting and cloud the real issues in this election. Corporate
governance reform is important, achieving consistent profitability is paramount.
BKF's June 8 announcement does not address the company's miserable operating
performance. The following table shows beyond doubt that BKF's performance
compared to its peers (measured by operating income and net income) is
unacceptable. Employee costs as a percentage of revenue are staggering. What has
BKF done in response to its operating performance woes? On June 1, 2005, it
granted golden parachutes to its General Counsel and Chief Financial Officer.
Twelve Months Ended December 31, 2004
-------------------------------------
Operating Employee
Income Employee Cost as a
as a Cost as a Percentage
Operating Percentage Percentage of of Operating Return on
Revenues Income of Revenues Revenues Income Equity
-------- ------ ----------- -------- ------ ------
(dollars in millions)
Affiliated Managers $660 $268 40.6% 36.6% 90.1% 11.7%
Group Inc.
Eaton Vance Corp.(1) $687 $235 34.3% 22.3% 65.1% 33.2%
Gabelli Asset $255 $99 38.8% 38.1% 98.1% 17.1%
Management Inc.
Nuveen Investments $506 $255 50.4% 32.7% 64.8% 29.4%
Inc.
Waddell & Reed $504 $163 34.5% 16.5% 51.0% 51.8%
Financial Inc.
BKF CAPITAL GROUP, $123 $3 2.4% 76.3% 3,126.7% (1.9)%
INC.
1 All figures for Eaton Vance Corp. are for the twelve months ended January 31,
2005.
ELECT DIRECTORS WHO ARE COMMITTED TO ENHANCING VALUE FOR ALL BKF STOCKHOLDERS.
Steel Partners' primary focus of this proxy contest is to elect directors who
are committed to reining in BKF's ever-increasing compensation expenses by
aligning compensation with performance and the interests of BKF's stockholders.
BKF's Board continues to ignore these issues. By postponing the Annual Meeting,
purportedly because of its belated adoption of certain corporate governance
initiatives, which we believe BKF never would have adopted on its own
initiative, BKF's Board has tried to divert stockholders' attention from these
operational issues.
2
Our director nominees are committed to these goals and to bringing BKF's
financial results in line with its peers. We call upon BKF's Board to publicly
commit to changing BKF's compensation structure so that it is aligned with the
interests of BKF's stockholders. We believe BKF's Board should publicly (1)
adopt a plan that it reasonably believes would result in BKF achieving operating
income as a percentage of revenue of 39.1%, net income as a percentage of
revenue of 21.3% and return on equity of 28% for 2005 (which figures represent
the median results of the five peer companies in the table above), and (2)
commence a search for a chief operating officer whose focus would be on
achieving these goals.
Unlike BKF's Board, which has flip-flopped on many of the issues raised during
this proxy contest, we have remained steadfast in our platform. We urge you to
elect our director nominees and to vote in favor of the other proposals on our
GOLD proxy card. Although BKF's Board wants you to believe that your vote is
moot on certain of these proposals, it is not! Your vote will clearly state to
BKF's Board that enough is enough and that corporate governance reforms and an
improved plan of operations must be approved and fully implemented.
LET'S EXAMINE THE FACTS SURROUNDING THE BKF BOARD'S ACTIONS DISCLOSED
IN ITS JUNE 8 ANNOUNCEMENT.
ELIMINATION OF RIGHTS PLAN
For three years, non-binding stockholder proposals were overwhelmingly adopted
by the stockholders demanding that BKF's Board redeem the poison pill. The Board
ignored each and every one of these stockholder proposals. In fact, in its proxy
statement dated May 10, 2005, the BKF Board stated that "the Board of Directors
believes that the Rights Plan as amended is in the best interests of the Company
and its stockholders." However, on June 8, 2005, the Board announced that it had
approved the full redemption of the rights under the Rights Plan effective on
the date on which the Annual Meeting is held. WHAT CHANGED DURING THIS 28-DAY
PERIOD? HAS THE BOARD SEEN THE LIGHT, OR IS IT MERELY PANDERING FOR VOTES TO
ELECT ITS SLATE OF DIRECTOR NOMINEES?
PURPORTED SALE PROCESS
In its proxy statement dated May 10, 2005, the BKF Board opposed the stockholder
proposal that an investment banking firm be engaged to pursue a sale of the
company. How curious! Nowhere in BKF's proxy statement did it state that in 2005
it had retained an investment banking firm to explore a sale of the company. We
believe this information should have been disclosed in BKF's original proxy
statement. What did BKF do instead? On June 8, 2005, the Board announced that
earlier this year it had indeed retained Merrill Lynch and Peter J. Solomon
Company to explore strategic alternatives, including a possible sale of the
company. HOW CAN BKF'S BOARD OPPOSE THE STOCKHOLDER PROPOSAL TO ENGAGE AN
INVESTMENT BANKING FIRM WHEN THEY HAD ALREADY DONE THAT WHICH WAS BEING ASKED OF
THEM? IS THIS THE BOARD YOU WANT TO TRUST TO EXPLORE POTENTIAL STRATEGIC
ALTERNATIVES FOR SELLING THE COMPANY? The Board would like you to believe that
the stockholder proposal to retain an investment banking firm to explore the
sale of the company is moot because of its newly revealed actions. We question
this conclusion. Could it be that BKF's Board was never fully committed to a
sale process since BKF's June 8 announcement indicates that only a limited
number of potential acquirors were contacted?
3
RELATED PARTY TRANSACTIONS
We and other stockholders have expressed serious concerns with BKF's history of
related party transactions. This pattern continues with the revelation in BKF's
June 8 announcement that Peter J. Solomon Company was retained purportedly to
assist in the sale of the company. DID THE BKF BOARD BELIEVE THAT MERRILL LYNCH
WAS NOT CAPABLE OF PROPERLY EXPLORING THE SALE OF THE COMPANY ON ITS OWN? WHAT
SPECIAL INSIGHT OR CONNECTIONS DOES PETER J. SOLOMON COMPANY POSSESS THAT
MERITED THE ENGAGEMENT OF A SECOND FIRM? HOW MUCH WILL PETER J. SOLOMON COMPANY
BE PAID BY BKF FOR THESE SERVICES? AS CORPORATE GOVERNANCE IS A KEY ISSUE IN
THIS PROXY CONTEST, SHOULDN'T THIS ARRANGEMENT HAVE BEEN DISCLOSED IN BKF'S
PROXY STATEMENT? IN FACT, SHOULD A RELATED PARTY SUCH AS PETER J. SOLOMON
COMPANY HAVE BEEN RETAINED AT ALL?
IS BKF'S BOARD FULLY COMMITTED TO OBTAIN THE 80% SUPERMAJORITY VOTE NECESSARY
TO APPROVE THE PROPOSAL TO DESTAGGER THE BOARD AND ELIMINATE THE SUPERMAJORITY
PROVISIONS FOR CERTAIN FUNDAMENTAL TRANSACTIONS?
In order for BKF's charter to be amended to destagger the Board and eliminate
the supermajority provisions for certain fundamental transactions, these actions
must be approved by the vote of at least 80% of the outstanding shares of common
stock. WHY DID BKF ALLOW ONLY APPROXIMATELY 30 DAYS TO SOLICIT VOTES IN FAVOR OF
THESE PROPOSALS? WHY HAS BKF'S BOARD NOT PUBLICLY STATED THAT THE MEMBERS OF THE
BOARD WILL VOTE THEIR SHARES IN FAVOR OF THESE AMENDMENTS? We question whether
these reforms would have been proposed by BKF's Board without pressure from
Steel Partners and other stockholders.
We continue to view this proxy contest as a means of last resort by which
stockholders can hold BKF's Board accountable for its slow, reactionary approach
to corporate governance reform. The facts speak for themselves. The Board's
binding proposal to destagger the Board was only recommended after we submitted
our non-binding proposal to destagger the Board. The Board subsequently revised
its proposal so that all directors would serve one-year terms beginning with the
2006 Annual Meeting (instead of the 2008 Annual Meeting) after Steel Partners
pointed out this deficiency. WOULD BKF'S BOARD HAVE MADE THIS CRITICAL
MODIFICATION TO THE BOARD DECLASSIFICATION PROPOSAL WITHOUT PRESSURE FROM STEEL
PARTNERS? Your support for our nominees has proven to be extremely effective in
forcing the Board to adopt important changes for the benefit of BKF and all its
stockholders. Please help us continue this effort by signing and returning your
GOLD proxy card today.
Thank you for your support,
/s/ Warren Lichtenstein
--------------------------------
Warren Lichtenstein
4
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IMPORTANT
PLEASE SIGN, DATE AND RETURN THE ENCLOSED GOLD PROXY CARD TODAY
IN THE POSTAGE-PAID ENVELOPE PROVIDED.
DO NOT SIGN ANY WHITE PROXY CARD THAT YOU MAY RECEIVE FROM THE COMPANY.
If your shares are held on your behalf by a broker or bank,
please sign, date and return the GOLD proxy in the
envelope provided and contact the person responsible for
your account and ask them to ensure that your shares are
voted on the GOLD card.
IF YOU HAVE ANY QUESTIONS, OR NEED ASSISTANCE IN VOTING YOUR SHARES, PLEASE
CONTACT THE FIRM ASSISTING US IN THE SOLICITATION OF PROXIES:
MORROW & CO., INC.
445 Park Avenue, 5th Floor
New York, New York 10022
(212) 754-8000
BANKS AND BROKERAGE FIRMS, PLEASE CALL: (800) 654-2468
STOCKHOLDERS CALL TOLL FREE: (800) 607-0088
E-MAIL: STEEL.INFO@MORROWCO.COM
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