Sun Capital Goes Activist

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The Board of Directors
Furniture Brands International, Inc.
c/o Mr. Ralph Scozzafava
Vice Chairman and Chief Executive Officer
101 South Hanley Road
St. Louis, Missouri 63105
Members of the Board:
We want to inform you that our affiliate SCSF Equities, LLC (“Sun Capital”) today filed a Preliminary Proxy Statement in connection with its nomination of three candidates for election to the Board of Directors of Furniture Brands International, Inc. at the upcoming Annual Meeting on May 1, 2008. Sun Capital is proposing that its three nominees be elected to the Board instead of three incumbent directors, maintaining the size of the Board at eight members. Our nominees are highly qualified, will bring much-needed corporate governance and operational expertise to the Board, and are committed to acting in the best interests of all shareholders.
[...]
We have taken this step because we are extremely concerned about Furniture Brands’ continued poor financial performance and do not believe the current Board is acting in the best interests of shareholders. Specifically, the current Board appears to have given very little consideration to at least two serious and credible proposals to acquire the Company at prices well above the existing stock price. In our view, the Board’s failure to properly consider these proposals represents a serious disregard of shareholder interests. Instead, the current Board continues to pursue a strategy that has led to substantial stock price declines and is not likely to turn the Company around. Furniture Brands’ latest turnaround plan revealed in October 2007 is not revolutionary, but rather an evolution of broad strategic themes that have been communicated to investors for several years and have clearly failed to recover margins and shareholder value. This plan does not quantify in any manner expected benefits and this lack of detail prevents shareholders from evaluating the risks and rewards of maintaining the status quo versus pursuing other strategic alternatives that may be preferable.

As you can see, Sun Capital, which has been showing signs of strain of late, mostly owing to their evolution into large and larger buyout transactions at a time when that's not exactly the place to be playing, is a little annoyed with Furniture Brands International ("FBI"). Sun, you may know, started off focused on smaller, control-only transactions, but by the end of 2006 and early 2007 was engaging in all sorts of "diversification" including PIPE transactions and other minority stakes in publicly helds. They picked up 5% of FBI in March of last year, and there is some debate as to whether their intent is actually to acquire the company, or if their interest has waned and activism is a last-ditch effort to prop up the flagging shares they are holding.

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