ATLANTA, June 5, 2012 /PRNewswire/ -- Covington
Investments, LLC (together with its affiliates ("Covington")) today
sent the following letter to the Board of Directors of Advocat Inc.
(NASDAQ: AVCA) (the "Company") once again urging the Company to
engage with Covington in regard to its proposal to purchase all
common shares of Advocat for $8.50
per share in a negotiated transaction and to make public, for the
benefit of all shareholders, the specifics of its strategic
plan. Covington notes that as of the date of its letter there
is still no indication from the Company that a financial advisor
has been engaged to evaluate Covington's proposal against the
Company's current, nebulous strategic plan.
June 5, 2012
Board of Directors
Advocat, Inc.
1621 Galleria Boulevard
Brentwood, TN 37027
Gentlemen:
We continue to be disappointed in the Board's complete lack of
engagement with us regarding our compelling proposal to acquire
Advocat Inc. ("Advocat" or the "Company"), and the Board's apparent
assumption that the views of your large shareholder directors
represent the views of your outside shareholders – those to
whom your fiduciary duties are the most important in this
matter. Following the Company's response on May 14, 2012 to our proposal to acquire all the
common shares of Advocat for $8.50
per share in cash, we have heard from a number of shareholders,
large and small, that they are unhappy with the Company's refusal
to engage with Covington. In addition, shareholders are
dissatisfied with the lack of information provided by Advocat and
the lack of explanation as to how it will deliver more value to
shareholders through its strategic initiatives – the same
initiatives which have not been successful historically and which
face even more significant execution risks in the face of current
regulatory and industry headwinds. The lack of detail and
information provided confirms our belief that there is no viable
plan that will deliver value comparable to our offer in a timely
fashion.
Moreover, absent from the Company's May
14 response was any mention that the Board or the Company
had engaged financial advisors to provide an opinion on the merits
of Covington's proposal relative to the Company's other
alternatives, which we believe is a customary practice in
situations where a company receives an acquisition proposal at a
significant premium to its stock price. We think your shareholders
expect and deserve even more transparency on your analysis of our
proposal and your strategic alternatives if you do not have the
financial opinion of an independent financial advisor. We
would also expect you to explain why you did not believe such an
opinion was necessary in the face of an approximate 100% premium
offer.
Accordingly, as a significant shareholder, we request that the
Company provide at the annual meeting this Thursday, June 7, 2012, a comprehensive web-cast
presentation on why and how its strategic plan will deliver value
in excess of the Covington proposal. A repetition of what has
been discussed on earnings calls over the past several years will
not be sufficient. We expect to see a detailed financial
analysis and credible approach to addressing the daunting execution
and industry risks facing Advocat. Shareholders need to be
convinced why the same old plan will work now, when it has not
succeeded in the past. We continue to doubt the existence of
a viable superior strategic alternative to our proposal and believe
the Company should stop delaying and give all shareholders the
opportunity to accept a cash amount certain now.
Covington stands ready to enter into discussions with Advocat
regarding its proposal to acquire the Company. The clear
feedback we have received from the Company's shareholders is that
they want Advocat to engage in discussions with Covington. It
is time to listen to your shareholders.
Sincerely,
/SIG/
John E. McMullan
President
Covington Investments, LLC
About Covington Investments, LLC
Covington's affiliates own and operate continuing care
retirement communities offering skilled nursing, assisted living,
independent living and home health services in Florida, Ohio, and Tennessee. The Companies'
combined campuses comprise over 1,000 skilled nursing and assisted
living beds as well as nearly 600 independent living units.
SOURCE Covington Investments, LLC