Danbury, CT - A significant battle for control of Ethan Allen is shaping up for the Annual Meeting in November. Ethan Allen Chairman and CEO Farooq Kathwari has responded to a shareholder letter sent August 26 questioning the management of the company.

Thomas Sandell, whose activist hedge fund owns 5.5% of Ethan Allen, stated in his latest letter, "sub-optimal fiscal policies and inefficient allocation of shareholder capital has resulted in the Company`s stock trading at a significant discount to its intrinsic value and has contributed to years and years of stock price underperformance." Sandell has been critical of Ethan Allen's aggressiveness in paying down its debt. Sandell said his group is "fully prepared to nominate a slate of director candidates to stand for election at the Company`s Annual Meeting."

Ethan Allen Chairman and CEO Farooq Kathwari

The activist's Sandell Asset Management Corp. had proposed a sale-leaseback strategy, for tax advantages. Ethan Allen believes pursuing the sale-leaseback strategy suggested in the shareholder letter, in which the Company would sell its retail and manufacturing locations and then lease them back, would impose a burden of significant lease expenses that would, "weaken its finances, restrict its continuing strategic repositioning of its retail footprint, limit its flexibility and erode its profitability."

Activist Hedge Fund Manager Thomas Sandell

Kathwari listed recent accomplishments over the past five years since coming out of the severe recession, saying Ethan Allen, "reduced $210 million of debt, invested $96 million in capital expenditures, paid $61 million in dividends, and repurchased $20 million of the Company's common stock."

The Company was able to invest $740 million in acquisitions of independently operated Ethan Allen retail businesses, in manufacturing and technology and in retail real estate. "As the Company continues its long term plan to relocate many of the retail locations to stronger locations," Kathwari continued, "vacated properties are being sold.  Since 2010, $34 million has been generated through the sale of real estate."

Showdown at the Annual Meeting?

Sandell had also been upset that the Annual Meeting was being moved up to October 15, saying that this gave his group little time to nominate directors, but then Ethan Allen moved it back, to November 24. According to Ethan Allen CEO Kathwari, "The Company reiterates its policy and practice of engaging with its shareholders to discuss the Company's objectives and understand the thoughts and objectives of its shareholders. We were pleased to have rescheduled the Annual Shareholders Meeting to November 24th."





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