The Forzani Group Ltd./Le Groupe Forzani Ltee

The Forzani Group Ltd./Le Groupe Forzani Ltee

May 20, 2009 19:00 ET

Forzani Group Mails Letter to Shareholders in Response To Dissident

--Shareholders urged to vote the WHITE proxy supporting Forzani board nominees--

CALGARY, ALBERTA--(Marketwire - May 20, 2009) - The Forzani Group Ltd. (TSX:FGL) today announced that it is mailing to shareholders a letter and accompanying WHITE proxy. The letter is from Chairman John Forzani. It responds to a dissident proxy circular issued by the New York hedge fund Crescendo Partners, which opposes two Forzani nominees for election to the board of directors at the June 10, 2009 annual meeting.

In the letter, Mr. Forzani provides a number of reasons why shareholders should vote the WHITE proxy for all eight of the company's nominees, as set out in the Management Proxy Circular available on SEDAR at and on the corporate website at

Among other reasons, Mr. Forzani states that the company has a strong board of directors, good corporate governance, a clear and focused strategy, and a track record of success. Mr. Forzani adds that Crescendo has put forward two nominees who bring lesser qualifications, has justified its campaign with false and misleading statements, and has shown no regard whatsoever for the strategic importance of Quebec to the company and its shareholders.

The complete text of the letter to shareholders is provided below.

May 20, 2009

Dear Fellow Forzani Shareholders:

As you know, our annual meeting will be held on June 10, 2009. This meeting is vitally important to you as a shareholder. Recently, a New York hedge fund called Crescendo Partners filed a dissident proxy circular by which it has nominated two individuals for election as directors to the Forzani board of directors. Your incumbent board is unanimous in its recommendation that Forzani shareholders should disregard Crescendo and its materials and only vote using the WHITE proxy in favour of Forzani's proposed slate of directors.

In summary, we believe:

- Forzani's highly qualified nominees bring superior experience, expertise and deep ties to our key franchisee community in Quebec, compared to the directors Crescendo aims to replace them with;

- Crescendo has misrepresented Forzani's track record and has sought both to denigrate and take credit for the success of our strategy;

- Crescendo's stated intentions, such as they are, reflect a shallow understanding of our business and would sell Forzani shareholders short on the value of their investment;

- Crescendo's conduct and misleading statements in pursuit of its demands for board representation should give shareholders serious concerns about its qualifications to be stewards of your investment; and that

- Crescendo's criticisms are unwarranted. Crescendo offers no strategy and its launch of a proxy contest is disruptive and costly to you as a shareholder.

I am confident that you will agree with our position after you read this letter.

I urge you to vote the WHITE form of proxy as recommended and set out in our Management Proxy Circular. The value of your investment is at stake. Every vote is important and we need your support.

Forzani's Nominees Vs. Crescendo's

Forzani has strong corporate governance, including a robust director nomination process that is careful, thorough, and aligned with current Canadian best practice. Electing directors is not a theoretical exercise. It is about identifying directors who possess the right mix of skills, expertise and experience to add value to the board's strategic deliberations. It is about having directors who know enough about the business to hold management accountable and can help to create value for shareholders. It is also about identifying people who represent the best interests of all shareholders.

In this regard, we encourage shareholders to carefully review and consider the qualifications of the two Forzani nominees that Crescendo opposes, and to compare them to Crescendo's own nominees.

We'll start with our nominee - and current Forzani director -- Henri Drouin, and his experience in multi-location Canadian national retailing. For 21 years, ending in 2002, Henri was chairman of hardware retail giant RONA Inc. of Boucherville, Quebec. This was a period of exceptional growth for one of Canada's great business success stories. Moreover, Henri is fluent in English and French, has been successful as a retail store owner, operator and franchisee in Quebec, and is a crucial local link between the board and our Quebec franchisees, approximately 40% of whom are unilingual francophones. This is no small matter - nearly one-third of Forzani's retail sales come from Quebec.

In contrast, Crescendo has put forward a US retail executive who has held five jobs in the past 11 years, none of them with companies having material operations in Quebec or elsewhere in Canada. Two months ago this executive was appointed CEO of a once famous but now struggling private toy store business. Immediately before that he spent a year heading the publicly-traded online retailer Perhaps it wasn't his fault, but while he was in charge the market value of the shares dropped by approximately 75%.

Now let's have a look at our nominee Donald Gass. Don, who retired last year as a partner from Deloitte & Touche LLP, is a former President of the Canadian Institute of Chartered Accountants and holds the prestigious Fellow Chartered Accountant (FCA) designation. He has decades of business experience, including personal involvement in numerous mergers, acquisitions, asset dispositions and restructurings. Don was selected for his unique expertise, as well as for his ability to serve as a member of the Audit Committee, ideally filling the gap that would otherwise have been left on our board with the upcoming retirement of Bill Grace, also an accounting expert and FCA.

In contrast, Crescendo has nominated a young man who obtained his MBA in the graduating class of 2005 (a fact that you won't find in Crescendo's dissident circular). Crescendo touts his experience as an officer of two privately held "blank cheque" companies; in other words, companies that typically exist on paper only and which have no operations. He apparently has no Canadian business background. In 1976, the year before this Crescendo nominee was born, Donald Gass was made a partner at Deloitte & Touche.

Forzani's Track Record

Crescendo has misrepresented our company's track record to justify its call for change.

Forzani has executed a well thought out and effective strategy to become the leader in the Canadian sporting goods sector. We acquired several banners as a way to become a leading presence in the market and recently announced a strategic plan to drive further synergies and maximize profitability across the enterprise over the next five years.

In an interview on Canada's Business News Network (BNN), Eric Rosenfeld, Managing Member of Crescendo Partners, appeared to take credit for this strategy. This lacks all credibility and is demonstrably false. Crescendo first met with us last month, in April 2009. Many of the initiatives that make up this strategy have been underway for almost two years, during which time we have restructured and streamlined our executive ranks, collapsed three buying teams into one, completely retooled our marketing and store operations, brought our merchandise assortment more in line with that of our successful franchise business, mapped out a clear and deliberate banner rationalization program and moved the head of our highly successful franchise operation to be the President of the company. We strongly encourage any shareholders who have doubts about the authorship of our strategy to discuss the point with Bob Sartor, our CEO, or Mike Lambert, our CFO.

And we haven't just talked a good game, we have shown results. Over the past three years, our EPS growth has been higher than that for comparable US sporting goods retailers, including Big 5, Cabela's, Dick's, Foot Locker, Gander Mountain and Hibbett, as well as Canadian Tire in Canada. During this same period, our same store sales growth has averaged higher than that for any of our peers, a result of our strong execution. Our average EBITDA margin of 8.3% during the past three years is in line with that of several of the leading industry players and significantly higher than that for several other players. The market has taken note of our results. Over the three-year period prior to Crescendo's filing of its dissident proxy circular, our stock outperformed that of our peers as well as both the S&P/TSX and S&P/TSX Retail indices.

Crescendo has also suggested that its interests are more aligned with yours because it owns 5.1% of Forzani shares while your current board owns 4%. I can tell you that your board is fully aligned with Forzani shareholders and that each of our directors complies with both Forzani's share ownership guidelines and the standards for director ownership suggested by the Canadian Coalition for Good Governance. More than that, the investment made by Forzani directors belongs to each of us personally, as opposed to an investment fund. As for me, not only do I have much of my net worth invested in Forzani, my name is on the door. You can be sure I want what is best for the company, its employees, franchisees, suppliers, customers, communities and, above all, my fellow shareholders.

Leaving aside the qualifications of its nominees and its other statements, Crescendo has offered no compelling rationale for why Forzani should grant it board representation. In its meetings with management, Crescendo representatives displayed a working but superficial knowledge of our business and never offered any specific recommendations, even when asked to do so. Following Forzani's Investor Day presentation, Mr. Rosenfeld complimented Forzani CEO Bob Sartor on the company's strategy.

Crescendo Has Made Numerous False and Misleading Statements

I don't like to use a lot of football analogies in business, but I was an offensive lineman. You line up opposite another man and whichever one of you is faster, stronger or smarter wins. The job is really quite simple, and there is some honour in it. There is no honour in the way Crescendo has played this game so far.

To date, in its proxy circular and media interviews, Crescendo has made a number of false and misleading statements. We believe this is too important a matter to let those statements stand, so permit me to set the record straight:

Crescendo's Statements(1) The Facts
"Over the course of the past two This is not true. Crescendo's approach
months Crescendo has made an effort has never been amicable. In its first
to reach an amicable resolution for meeting with Forzani management,
the election or appointment of Crescendo said it wanted three seats
Crescendo nominees to the Board of on the board and in its first meeting
Directors." by telephone with our lead director Al
Bellstedt, and me, Crescendo
threatened a proxy fight if it was
"Crescendo's request for an This is not true. Crescendo requested
in-person meeting with Forzani's that lead director Al Bellstedt and I
Chairman and lead independent travel to New York on three days notice
director was declined." Al and I were each traveling at the
time and could not coordinate our
schedules on such short notice.
Instead, we offered a meeting in
person the following week. Crescendo
declined because Mr. Rosenfeld would
be in Europe at that time, so we met
by conference call instead.
"Forzani rejected the concept of any This is not true. In response to its
Crescendo nominees serving on the demands, Forzani told Crescendo it
Board of Directors irrespective of would consider its request and asked
the Company having an open board Crescendo to provide the names of its
position to fill." proposed candidates, the names of any
other Forzani shareholders who
supported Crescendo's demands, and to
share with us any strategic suggestions
or proposals they might wish the board
to consider. Crescendo refused to
answer these questions and did not
reveal the identity of its nominees
until filing its dissident circular.

Crescendo did, however, offer to
provide references Forzani could speak
with about Crescendo. We accepted this
offer and spoke to a number of
individuals who currently sit (or
previously sat) on public company
boards with Crescendo representatives.
We also spoke to a number of other
people not suggested to us by Crescendo
who had also had experience with
Crescendo representatives. In no case
did any of these individuals identify
differentiating value provided by
Crescendo as compared to other
qualified directors.

I expect many of our shareholders
would have been disappointed in our
board if we had granted any seats to
anyone, sight unseen and without a
plan of any kind.
"Crescendo is convinced that This is not true, even though Crescendo
Forzani's current board of directors may be "convinced" of it. As Forzani
missed an exceptional opportunity to disclosed during that period, the
facilitate the sale of the Company company received a number of inquiries
in the spring/summer of 2007." regarding a possible acquisition
of the company. In response to these
inquiries, the Board formed an
independent committee, hired financial
advisors and legal counsel, and pursued
negotiations with two highly qualified
bidders. In the end, despite Forzani's
efforts to assist in securing purchase
financing, neither party could obtain
the financing necessary to make a
binding offer.

This was the Summer of 2007, at the
onset of a global credit crisis that
has crippled financial markets. It is
unfair and entirely self-serving for
Crescendo to suggest the Forzani board
"missed an opportunity".

(1) Crescendo dissident proxy circular, May 13, 2009.

Vote the White Proxy

Forzani has a strong board of directors, good corporate governance, a clear and focused strategy, and a track record of success. Crescendo has put forward two nominees who bring lesser qualifications, justified its campaign with false and misleading statements, and has shown no regard whatsoever for the strategic importance of Quebec to Forzani and its shareholders.

I hope, after you have read this letter and considered the issues addressed in this letter, that you will vote the WHITE proxy and elect all eight of Forzani's nominees.

DO NOT let Crescendo succeed with its disruptive actions. Vote your WHITE proxy today.

Yours truly,

John Forzani, Chairman

The Forzani Group and its board are advised by Greenhill & Co., as independent financial advisors, Blake, Cassels & Graydon LLP, as legal counsel and Georgeson Shareholder Communications Inc., as proxy solicitation agent. Shareholders with questions or needing assistance in voting their WHITE proxy are encouraged to call Georgeson at (North American Toll-Free) 1-888-605-8368.

About The Forzani Group

The Forzani Group Ltd. is Canada's largest national retailer of sporting goods, offering a comprehensive assortment of brand-name and private-brand products, operating stores from coast to coast, under the following corporate and franchise banners: Sport Chek, Coast Mountain Sports, Sport Mart, National Sports, Athletes World, Sports Experts, Intersport, Econosports, Atmosphere, Tech Shop/Pegasus, Nevada Bob's Golf, Hockey Experts, S3 and Fitness Source. The Company also has websites for several of its corporate and franchise banners, which can be accessed through its main website at

Corporate Website:

This news release contains certain statements that may constitute forward-looking information within the meaning of applicable securities laws. This forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such information. Such information involves the use such words as "may", "will", "expect", "believe", "plan", "intend", "are confident" and other similar terminology. This information reflects current expectations regarding future events and operating performance and speaks only as of the date of this news release. Forward-looking information involves significant risks and uncertainties, should not be read as a guarantee of future performance or results, and will not necessarily be an accurate indication of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking information including, but not limited to, the factors discussed in the Company's Management Discussion and Analysis and Annual Information Form filed with the securities regulatory authorities in Canada, available at Although the forward-looking information in this news release is based upon what management believes are reasonable assumptions, the Company cannot assure actual results will be consistent with this forward-looking information and, therefore, you should not place undue importance on this information. While the Company may elect to do so, it does not undertake to update this forward looking information to reflect new information or circumstances at any particular time.

Contact Information

  • The Forzani Group Ltd.
    Robert Sartor, CA
    Chief Executive Officer
    (403) 717-1342
    The Forzani Group Ltd.
    Michael Lambert, CA
    Chief Financial Officer
    (403) 717-1666
    or (for information related to the vote)
    (North American Toll-Free) 1-888-605-8368
    or (for media)
    Longview Communications
    Alan Bayless
    (604) 694-6035