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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 Rule14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
BEVERLY ENTERPRISES, INC.
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(Name of Registrant as Specified in its Charter)
ARNOLD M. WHITMAN
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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[ ] Fee computed on table below per Exchange Act
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March 14, 2005
Dear Fellow Beverly Shareholders:
As you may know, Formation Capital, LLC and its partners, Appaloosa
Management L.P. and Franklin Mutual Advisers, LLC - who, together, own
approximately 8.1% of the outstanding shares of Beverly Enterprises - have
offered to buy all of the remaining shares of Beverly.
OUR PROPOSAL WOULD PROVIDE SUPERIOR VALUE TODAY
TO ALL BEVERLY SHAREHOLDERS
Our offer would deliver to shareholders $11.50 per share. We believe this
proposal provides far greater value than Beverly can generate as a
stand-alone company. If the Board and its advisors fairly and objectively
evaluate our proposal, we are confident that they will recognize that our
proposed transaction is compelling, could be completed promptly and will
provide shareholders with cash value greater than Beverly could achieve on
its own. In fact:
o Our proposal represents a premium of 46% to the average closing price
of Beverly's shares from December 31, 2003 through January 24, 2005,
the last trading day before we made our proposal public.
o When we disclosed our offer price, it was higher than any closing
price for the Beverly shares since August 2001 - indeed, the stock had
not closed above $10.00 since October 2001.
As noted in a J.P. Morgan Securities analyst report dated January 25, 2005:
"...THE $11.50 PURCHASE PRICE PROPOSED IMPLIES A MULTIPLE OF 8.3X
[EV/EBITDAR] ...THIS REPRESENTS A PREMIUM RELATIVE TO BEVERLY'S
PRE-EXISTING MULTIPLE OF 6.8X AND -MORE IMPORTANTLY - FALLS WELL ABOVE
THE RANGE ESTABLISHED BY THE COMPANIES THAT WE VIEW TO BE ITS
HIGHER-QUALITY PEERS. MOST NOTABLY, THE PURCHASE PRICE MULTIPLE IS
HIGHER THAN THAT PRESENTLY BEING ASCRIBED TO HCR MANOR CARE (AT 8.0X),
WHICH LIKEWISE OWNS MOST OF ITS REAL ESTATE ASSETS."
Of course, since our interest in purchasing the Company became public, the
share price has traded above our initial $11.50 offer. Indeed, if justified
by due diligence, we might even pay more.
BEVERLY'S MANAGEMENT SIMPLY REFUSES TO TALK TO US
AND THEREFORE IS NOT ACTING IN YOUR BEST INTERESTS
Unfortunately, your management and Board of Directors not only rejected our
offer, but they have refused to engage in any discussions with us, or let
us do any due diligence! We had no choice other than to commence a proxy
contest to give the shareholders, the true owners of Beverly, the
opportunity to decide for themselves whether or not the current directors
are acting to maximize shareholder value.
The current Board has recently taken a series of steps that appear designed
to entrench themselves and fly in the face of good corporate governance
practices. They imposed a poison pill on shareholders and accelerated the
date of the annual shareholder meeting in an unsuccessful attempt to
prevent us from proposing a slate of directors. And, the "Long-Term Care
Resident Protection Act" that was recently proposed in the Arkansas
legislature appears to be nothing more than a thinly disguised vehicle
designed to further entrench the Board and management at Beverly with no
regard as to the interest and will of its shareholders. While the bill
purports to protect residents of long-term care facilities, it does nothing
to advance that goal. Moreover, we believe the bill would violate Federal
and State law.
WE WOULD ENCOURAGE YOU TO ASK OF BEVERLY'S BOARD AND MANAGEMENT:
o WHY NOT TALK TO FORMATION?
o WHY NOT SEE WHAT FORMATION WILL OFFER FOR YOUR SHARES AFTER THE
OPPORTUNITY TO CONDUCT DUE DILIGENCE?
o ARE YOU ACTING IN THE BEST INTERESTS OF YOUR SHAREHOLDERS?
FORMATION HAS NOMINATED SIX INDEPENDENT DIRECTORS WHO WILL ACT
IN THE BEST INTERESTS OF ALL SHAREHOLDERS
Given Beverly's actions, we have nominated for election at Beverly's
upcoming annual meeting a slate of directors who will represent the best
interests of all Beverly shareholders. This slate is comprised of
independent, highly qualified nominees with relevant board and health care
industry experience. Notably, two of our nominees are former Mariner Health
Care directors who recently maximized value for the Mariner shareholders
through a sale of the Company. Our proxy statement contains biographies of
our nominees.
If elected, these nominees will, subject to their fiduciary duties, be
committed to maximizing the value of your investment in Beverly by
implementing a process that would give due consideration to our offer as
well as any other proposals the Company may receive from us or others.
UNDER ITS CURRENT LEADERSHIP BEVERLY HAS SIGNIFICANTLY
UNDERPERFORMED COMPARED TO ITS PEERS
Beverly's management would have you believe that it can create more value
for shareholders on its own. Let history speak for itself. What kind of
value has Beverly CEO Bill Floyd and his management delivered to you?
Mr. Floyd argues that your share price has more than quadrupled since
January 2003 when the stock was as low as $1.91 per share. What Mr. Floyd
fails to note is that on January 31, 2001, the day before he became
Beverly's CEO, the company's shares closed at $7.49.
"THE REALITY IS THAT BEVERLY SHARES HAVE NOT TRADED AS HIGH AS THEY
ARE NOW SINCE JULY 2001, WHEN THEY HIT $12.10 PER SHARE AFTER BEVERLY
ANNOUNCED IT HAD, AT LONG LAST, SECURED A BUYER FOR ITS FLORIDA
NURSING HOME OPERATIONS. AND WHO WAS THAT BUYER? FORMATION CAPITAL, OF
COURSE."
STEVE MONROE
THE SENIORCARE INVESTOR
FEBRUARY 7TH, 2005
Since Mr. Floyd became Beverly's CEO, the company's share price has
significantly underperformed relative to others in the industry. On October
1, 2004, the trading day before we first began investing in Beverly, the
Beverly shares closed at $7.53, only 0.5% above the closing Beverly share
price on the day before Mr. Floyd became Beverly's CEO. As demonstrated in
the table below, it's clear that Beverly's stock performance has
significantly lagged that of others in the industry:
------------------ ---------------- ----------------------- -------------------
TIME BEVERLY PEER PEER
PERIOD PERFORMANCE COMPANY PERFORMANCE
------------------ ---------------- ----------------------- -------------------
1/31/2001-10/1/2004 0.5% Manor Care, Inc. (HCR) 58.7%
------------------ ---------------- ----------------------- -------------------
1/31/2001-10/1/2004 0.5% Extendicare Inc. (EXE) 360.4%
------------------ ---------------- ----------------------- -------------------
12/2/2003-10/1/2004(1) -10.9% Genesis HealthCare
Corporation (GHCI) 34.2%
5/1/2001-0/1/2004(2) -2.2% Kindred Healthcare, Inc.
(KND) 59.1%
------------------ ---------------- ----------------------- -------------------
5/23/2002-6/28/2004(3) 0.6% Mariner Health Care, Inc.
(MHCA) 48.9%
------------------ ---------------- ----------------------- -------------------
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1 Reflects period from December 2, 2003, the first trading day after
GHCI was spun-off by Genesis Health Ventures, Inc. until October 1,
2004, the trading day before the Consortium began making significant
market purchases of Beverly shares.
2 Reflects period from May 1, 2001 (first available stock price data on
Bloomberg) after KND emerged from bankruptcy on April 20, 2001 until
October 1, 2004.
3 Reflects period from May 23, 2002 (first available stock price data on
Bloomberg) after MHCA emerged from bankruptcy on May 13, 2002 until
June 28, 2004 (the last trading day prior to the announcement of its
sale to National Senior Care, Inc.).
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Mr. Floyd argues, "the Board and management of Beverly Enterprises have
turned around the company's operating and financial performance" (Letter
from W. Floyd to A. Whitman on 1/27/05). In reality, under the management
of Mr. Floyd, Beverly's overall performance has been stagnant. In fact,
Beverly's EBITDA margin has remained flat at 9% since 2001. And, the EBITDA
margin in Beverly's senior nursing facility (SNF) business has actually
declined since 2000, despite a three-year program to divest underperforming
facilities.
The fact is that Beverly's management has failed to deliver value to
shareholders, and the offer by Formation Capital and its partners would
deliver immediate and concrete value today.
FORMATION CAPITAL AND ITS PARTNERS ARE TOTALLY COMMITTED TO THIS
TRANSACTION AND HAVE THE RESOURCES TO MAKE THIS DEAL HAPPEN
Formation Capital and its partners, Appaloosa Management L.P and Franklin
Mutual Advisers, LLC, have the experience, financial strength and resources
to ensure that Beverly's management and Board are not able to deny you the
benefits this transaction would bring. Appaloosa, formed in 1993, is one of
the largest hedge funds in the country, with over $3.5 billion under
management. Franklin Mutual is a subsidiary of Franklin Resources, Inc.,
the largest publicly traded mutual fund company in the United States.
Franklin Mutual manages the Mutual Series family of public mutual funds,
with over $35 billion under management.
Formation Capital, Appaloosa and Franklin Mutual have committed to provide
an aggregate equity contribution of $375 million to the newly formed
acquisition entity, consisting of $150 million from Appaloosa, $175 million
from Franklin Mutual and $50 million from Formation. In addition, we have
numerous expressions of interest from financial institutions willing to
commit to debt financing for a transaction and are in the process of
negotiating the material terms of the debt financing. Based on these
negotiations, we are confident in our ability to obtain the full amount of
the financing necessary to complete a transaction.
To underscore how serious we are, we have also retained the highest quality
legal and financial counsel to ensure this transaction is completed and you
receive the full value for your shares.
FORMATION CAPITAL HAS A PROVEN TRACK RECORD IN HEALTHCARE
Formation has a proven track record in healthcare. Formation has focused on
the healthcare industry, providing equity to the senior housing and
long-term care industry, since its founding in 1999. We believe that
creating value can only happen when high quality patient care comes first.
Currently, Formation manages assets in excess of $650 million in value.
Over the last three years, Formation and its partners have acquired an
ownership interest in 152 facilities in 20 states, including 49 skilled
nursing facilities and four assisted living centers we bought from Beverly
in Florida in 2002. AT THE FACILITIES WE BOUGHT FROM BEVERLY IN 2002,
PATIENT CARE METRICS ACTUALLY IMPROVED AFTER THE TRANSACTION. According to
the records of State of Florida Agency for Healthcare Administration
(AHCA), the number of Federal deficiencies at these facilities that
constitute actual harm in scope and severity was reduced by 51% from 2001
to 2004(4).
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4 Source: State of Florida Agency for Healthcare Administration (AHCA).
How have we delivered high quality patient care? At Formation, our
philosophy is to separate the real-estate business from the care operations
and create a regional or locally-based structure that incentivizes
operators to provide the best possible care. We believe our track record
clearly demonstrates how this model results in patients' receiving
excellent care and provides unparalleled opportunities for empowering
employees.
WE ARE FIRMLY CONVINCED THAT PURSUING OUR PROPOSAL WOULD MAXIMIZE VALUE FOR
SHAREHOLDERS AND, AT THE SAME TIME, ENSURE HIGH QUALITY CARE FOR PATIENTS
AND - DESPITE WHAT BILL FLOYD SAYS - WE ARE CONFIDENT WE WILL BE ABLE TO
FINANCE OUR PROPOSAL.
HOW TO PROTECT YOUR INTERESTS
Enclosed is Formation Capital's definitive proxy statement, which includes
important information related to the election of Beverly directors. To
maximize the value of your investment, we urge you to VOTE FOR OUR NOMINEES
by signing, dating and returning the enclosed BLUE proxy card. If you have
previously signed a white proxy card, you can automatically revoke it by
signing, dating and returning the enclosed BLUE proxy card in the
accompanying envelope.
If you have any questions about voting, or for more information, please
call our proxy solicitors, MacKenzie Partners, Inc., toll-free at (800)
322-2885.
Thank you & Sincerely,
Arnold M. Whitman
Chief Executive Officer
Formation Capital
IMPORTANT INFORMATION
On March 14, 2005, Arnold Whitman filed a definitive proxy statement with
the SEC for the solicitation of the stockholders of Beverly Enterprises in
connection with the Company's 2005 annual meeting of stockholders. Security
holders of Beverly Enterprises are urged to read the proxy statement and
any other proxy solicitation materials filed by Mr. Whitman because they
contain (or will contain) important information. Mr. Whitman and certain
other persons may be deemed to be "participants in the solicitation" (as
defined in Instruction 3 to Item 4 of Schedule 14A of the Securities and
Exchange Act of 1934, as amended) of the stockholders of Beverly
Enterprises in connection with the Company's 2005 annual meeting of
stockholders. A list of these persons and a description of their interests
in the solicitation is included in the definitive proxy statement.
Investors may obtain a free copy of the definitive proxy statement and
other documents filed by Mr. Whitman with the SEC at the SEC's website at
www.sec.gov. Investors will also be able to obtain a free copy of the
definitive proxy statement and these other documents by contacting
MacKenzie Partners, Inc., the proxy solicitor retained in connection with
the solicitation, at (212) 929-5500 (call collect) or (800) 322-2885 (call
toll-free) or by email at proxy@mackenziepartners.com.
Consent has not been sought or obtained for the use, as proxy-soliciting
material, of previously published material reproduced in this document.
[MACKENZIE INFORMATION BOX]