Filed
by
Western Sizzlin Corporation
Pursuant
to Rule 425 under the Securities Act of 1933
Subject
Company: ITEX Corporation
Registration
No. 333-148349
On
January 28, 2008, Western Sizzlin Corporation issued the following press
release:
SARDAR
BIGLARI ISSUES LETTER TO SHAREHOLDERS OF
ITEX
CORPORATION
Roanoke,
VA – January 28, 2008 – Western Sizzlin Corporation (OTC Bulletin Board:
WSZL) Chairman and CEO Sardar Biglari issued the following letter today
to the shareholders of ITEX Corporation (OTC Bulletin Board:
ITEX):
To
the Shareholders of ITEX:
We
are
interested in purchasing ITEX Corporation. To fulfill our intention, we have
structured an offer that, in our view, is a great deal, providing you a
substantial premium for your shares. My goal in this letter is to impart
to you
who we are, what our plans are, and why we believe your tendering your stock
would maximize the return on your investment.
Who
is Western Sizzlin Corporation?
The
Western stock you would receive would make you an owner of Western Sizzlin
Corporation (“Western”) and allow you to retain an interest in ITEX, which would
then become a subsidiary of Western. What you are getting is not a steakhouse
even though that is how our name originated. Some have wrongly viewed us
as a
restaurant company seeking to buy a barter business.
Western
is a holding company, owning interests in other businesses, in whole and
in
part, with the prime objective of achieving high returns on capital in pursuit
of maximizing long-term value for the benefit of all of its stockholders.
We
believe our holding company structure is an effective business model, as
it
allows our subsidiaries to focus on overseeing their day-to-day operations
and
Western to focus on allocating capital. We are committed to investing in
ITEX to
enlarge its business both through organic growth and through acquisition.
Because Western is in the business of acquiring other businesses, we believe
businesses we currently own plus ones we may buy in the future can increase
transactional volume for ITEX and make its broker network more valuable over
time.
One
area
of specialization for Western is franchising. One of our
subsidiaries, Western Sizzlin Franchise Corporation (“WSFC”), franchises 116
restaurants. WSFC is similar to ITEX in that both deal in franchising. The
difference is the underlying business of each franchise. The franchise network
for WSFC generated system-wide sales (i.e., total franchisee revenue) of
approximately $194 million in its last fiscal year, whereas ITEX generated
$14
million.
How
much are we paying for ITEX?
Our
offer
values the entire ITEX Corporation as of today at $16.4 million as compared
to
its current market value of $14.2 million, which represents a premium of
16% for
your stock. ITEX CEO Steve White writes in his January 7, 2008 letter to
me,
“ITEX trades at a multiple of 4 to GAAP earnings” as a reason why he deems our
offer as undervaluing ITEX. We think this is a fallacy. In economic reality,
net revenues for ITEX in fiscal 2007 were $4.5 million. A closer
examination of those figures reveals that in its last fiscal year, ITEX reported
$4.5 million of net income, equal to its total net revenues, but in
reality only earned $1.7 million pre-tax. We therefore think a more appropriate
measure of valuation should be based on pre-tax earnings, given that ITEX’s
bottom-line earnings include significant, non-cash tax credits taken as a
result
of its past losses. Consequently, our offer implies a multiple of 10 to pre-tax
earnings. In addition, in its most recent quarter, ITEX’s pre-tax earnings were
down a staggering 25% over the comparable period last fiscal year.
Why
are we paying a significant premium?
Simply
put, we believe we have the ability to increase ITEX’s value. We believe the
combination of companies would increase the barter volume of ITEX through
our
other subsidiaries, reduce redundant public company costs, and provide financing
for other acquisitions. We have concluded that these advantages, plus
other reasons, justify the premium we are paying. In addition, we are paying
you
in stock of the combined company, thereby allowing you to share in the upside
potential.
On
the
other hand, should you wish to monetize the shares of Western you would receive
in the offer, we believe you will benefit from a more liquid stock than you
currently own. Western has applied for listing on NASDAQ under the
symbol WEST, whereas ITEX’s stock trades on the over-the-counter bulletin
board. Furthermore, ITEX’s current market capitalization is
approximately $14 million; pro forma for the transaction, Western would have
a
market capitalization today of approximately $54 million. We firmly
believe that a NASDAQ listing and a larger combined market capitalization
would
enhance liquidity and reduce transaction costs for stockholders wishing to
enter
or exit the stock.
Misinformation
from ITEX
We
do not
plan to correct every faulty and flawed statement by Mr. White, although
he has
made a number of errors. But one point must be clarified because it has fueled
a
number of inquiries. In ITEX’s Schedule 14D-9 filing, I was misquoted as having
said that if Mr. White were not going to support the offer, he would “not have a
future with the Company.” This statement is categorically false, and we
will make the SEC aware of his mistaken remark. We have repeatedly said,
publicly and privately, that we intend for management to remain in place,
a
decision that is consistent with our holding company structure.
Increasingly,
however, we are concerned about the actions of the ITEX board and Mr. White.
One
point that Mr. White did express is that ITEX, like his house, “is not for
sale.” The only problem with that logic is that you, the shareholders, own ITEX
— not Mr. White. ITEX is a public
company owned by public stockholders. We are presenting you with a terrific
opportunity to exchange your stock at a substantial premium.
Because
we have resolved to acquire ITEX, we will extend our offer as necessary to
do
so. We have the resources to pursue the acquisition of ITEX, and we will
remain
committed because we believe that doing so is in the best interests of all
stockholders. Moreover, we believe the franchisees and the brokers of ITEX
would
also gain from the transaction.
If
you
need additional copies of the exchange offer materials, or other information
regarding Western, you may obtain these materials for free from our Information
Agent, Morrow & Co., LLC, 470 West Avenue, Stamford, CT 06902, e- mail:
offer.info@morrowco.com. Banks and brokerage firms please call (203) 658-9400.
Stockholders call toll free, (800) 607-0088.
We
look
forward to serving your best interests.
|
Sincerely,
|
| |
|
/s/
Sardar Biglari
|
| |
|
Sardar
Biglari
|
************
This
press release is for informational purposes only and is neither an offer
to sell
nor a solicitation of an offer to buy any securities. Any exchange
offer will be made only through a registration statement and related
materials. In connection with the exchange offer, Western has filed a
registration statement on Form S-4 (containing a prospectus) with the Securities
and Exchange Commission. Investors and stockholders of ITEX are
advised to read these disclosure materials (including other disclosure materials
when they become available) carefully because they contain (and will contain)
important information. Investors and stockholders may obtain a free
copy of the disclosure materials and other documents filed by Western with
the
Securities and Exchange Commission at the SEC’s website at
www.sec.gov. A free copy of the disclosure materials and other
documents of Western may also be obtained from Western upon request by directing
such request to the Information Agent, Morrow & Co., LLC, 470 West Avenue,
Stamford, CT 06902, E-mail: offer.info@morrowco.com. Banks
and brokerage firms please call: (203) 658-9400. Stockholders call
toll free: (800) 607-0088.
About
Western Sizzlin Corporation
Western
Sizzlin Corporation is a holding company which owns a number of subsidiaries.
Its most important business activity is conducted through Western Sizzlin
Franchise Corporation, which franchises and operates 123 restaurants in 19
states. Financial decisions are centralized at the holding company level,
and
management of operating businesses is decentralized at the business unit
level.
Western’s prime objective is to maximize its intrinsic business value per share
over the long term. In fulfilling this objective, Western will engage
in a number of diverse business
activities to achieve above-average returns on capital in pursuit of maximizing
the eventual net worth of its stockholders.
Forward-Looking
Statements
This
release contains forward-looking statements relating to Western Sizzlin
Corporation’s exchange offer for all of the outstanding shares of ITEX
Corporation common stock and Western’s expectations with regard to the proposed
transaction. These forward-looking statements are based on Western’s
current intent, expectations, estimates and projections and are not guarantees
of future performance. These statements involve risks, uncertainties,
assumptions and other factors that are difficult to predict and that could
cause
actual results to vary materially from those expressed in or indicated by
them. In addition, some factors are beyond Western’s
control. Factors that could cause actual results to differ materially
from the statements made in this release include, among others: (i) the
willingness of ITEX stockholders to tender their shares in the exchange offer
and the number and timing of shares tendered; (ii) the satisfaction, or waiver
by Western to the extent legally permissible, of all conditions to the exchange
offer; (iii) Western’s and ITEX’s ability to receive any and all necessary
approvals, including any necessary governmental or regulatory approvals;
and
(iv) other factors as described in filings with the Securities and Exchange
Commission, including the factors discussed under the heading “Risk Factors” in
Western’s prospectus included in its registration statement on Form S-4 as filed
with the Securities and Exchange Commission on December 27, 2007.
Contact:
Robyn
B.
Mabe, Chief Financial Officer
Western
Sizzlin Corporation
(540)
345-3195