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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
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[ ] Preliminary Proxy Statement
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Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[X] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
ERLY INDUSTRIES, INC.
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(Name of Registrant as Specified In Its Charter)
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[ERLY INDUSTRIES INC. LOGO]
September 10, 1997
Dear Fellow Shareholder:
You have probably received from the Powell Group proxy material soliciting your
vote to remove your Board of Directors and to elect their own slate of
handpicked nominees to run your Company. The Powell Group includes Noble
Trenham, his stock brokerage firm First Global Securities, Inc., Nanette Kelley,
her private holding company The Powell Group, and its subsidiary Farmers Rice
Milling, Inc., a direct competitor of ERLY's subsidiary American Rice, Inc.
WE URGE YOU TO DISREGARD THE POWELL GROUP'S PROXY MATERIAL.
Nanette Kelley and Noble Trenham are opportunistic dissidents who distort the
truth and seek to enrich themselves at the expense of other shareholders. Mr.
Trenham and his firm own only twelve shares of ERLY stock but will be paid over
$500,000 by Ms. Kelley's company if the Powell Group wins control of ERLY--at
your expense since Ms. Kelley intends to pass all of the Powell Group's costs on
to ERLY. Ms. Kelley and her company own only 3.6% of the outstanding shares of
the Company--which they bought just six months ago at a price well below the
current market price.
WE ALSO URGE YOU TO READ THE ENCLOSED ERLY INDUSTRIES 1997 ANNUAL
REPORT.
You will then see the results of your Management's successful implementation of
a farsighted program to diversify and strengthen the Company's business. And you
will understand the extent to which many of the Powell Group's claims are simply
false.
You will see, for example, that in the last five years, under the direction of
the current Board of Directors, ERLY has achieved compound annual growth rates
of:
19% in Net Sales
34% in Operating Profits
311% in Shareholders' Equity
This is a record matched by few other companies, public or private. Nothing is
known of the Powell Group's ability to manage similar growth because their
experience is limited to private companies in which they have had no
responsibility to public shareholders and in which their financial statements
and accounting methods are not subject to public scrutiny. But we do know that
not one of their nominees has had any experience running an international
agribusiness of the size and complexity of your Company. Nonetheless, the Powell
Group is attempting to gain control of your Company by making misleading
statements to get your proxy or your vote. Don't be confused. Just take a look
at the FACTS compared to the Powell FICTION.
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STOCK PERFORMANCE
Powell FICTION: The Powell Group claims that ERLY stock has "woefully under
performed the stock market."
The FACT: For the five fiscal years ended March 31, 1997, ERLY's
stock outperformed the average return for Nasdaq (U.S.
companies) by approximately 50% and the average return for
S&P Food Products Index by over 62%.
MANAGEMENT EXPERIENCE
Powell FICTION: The Powell Group wants to replace your current Board of
Directors with their purportedly highly-qualified and
experienced nominees.
The FACT: The Powell Group nominees have absolutely no experience in
managing a publicly-held international agribusiness like
ERLY. They also have no meaningful experience in marketing
and selling branded food products in domestic or
international markets. Whatever experience Ms. Kelley has is
with a private company that has no accountability to public
shareholders and is not subject to public scrutiny of its
financial statements or accounting methods. By comparison,
your Management has an aggregate of over 230 years of
experience in the food business, including a wealth of
experience in marketing and selling branded food products in
domestic and international markets.
MANAGEMENT'S PROPOSALS
Powell FICTION: ERLY's management is seeking to reduce shareholders' rights
by proposing to eliminate cumulative voting and shareholder
action by written consent.
The FACT: On the contrary, your Management is giving up its right to
ensure the election of at least two members of the Board of
Directors through cumulative voting. Your Management is
willing to surrender this power so that the Board of
Directors will not be hampered by divisiveness or a
potential conflict of interest as a result of the election
of one or more hostile directors by the Powell Group based
on proxies from a minority of shareholders. The proposed
elimination of shareholder action by written consent is in
direct response to the Powell Group's original proposal to
remove directors by written consent and to call a special
meeting to elect new directors, a proposal which would have
left ERLY without a Board of Directors for an indefinite
period of time.
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CREDIBILITY
Powell FICTION: The Powell Group has gone to great pains to review our
performance over the past ten years. This may lead you to
believe that they are long-term investors.
The FACT: The Powell Group purchased their shares in a private
transaction arranged by Mr. Trenham just six months ago, at
a price which was well below today's market price. We don't
believe that they are in for the long haul-- rather they are
trying not only to get on the band wagon, but to drive away
with it as well.
Powell FICTION: The 3.6% of the outstanding shares that the Powell Group
purchased six months ago is an indication of what they have
at stake.
The FACT: You should be aware that three of the five Powell Group's
nominees for the Board of Directors - namely, Messrs.
Cafiero, Seale and Spain - do not individually own a single
share of ERLY Industries. By contrast, your Management
collectively own almost 38% of the outstanding shares of the
Company, more than ten times the stake of the remaining
members of the Powell Group, and therefore have ten times
more to lose if the Company doesn't prosper - WE ARE NOT
SHORT TERM OPPORTUNISTS. The current directors of ERLY are
Doug Murphy, Bill Burgess, Bill McFarland, Al Wiener and
myself, Gerry Murphy. And our long-term interest in
enhancing shareholder value is evident by the growth of the
Company under our leadership.
Powell FICTION: The Powell Group is committed to representing and maximizing
the value of your investment.
The FACT: The Powell Group is not even committed to telling you the
truth. They are willing to hold out false promises and
mislead you to get your vote. Here are just a few examples:
- On July 17, 1997, Ms. Kelley confronted your Management with
her demand to take control of the Board by misrepresenting
that she controlled the vote of 51% of the outstanding
shares of the Company. In truth, she and her affiliates
actually controlled only a small minority of outstanding
shares.
- A week later, in a document filed with the Securities and
Exchange Commission, Ms. Kelley claimed that the Powell
Group was one of the largest privately-owned companies in
the southern United States, a blatantly untrue claim which
the Powell Group has since not dared to repeat in print
after the SEC questioned the basis for that statement. Ms.
Kelley now apparently claims that the net worth of her
private holding
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company, The Powell Group, is only twice that of ERLY and
its subsidiaries and that Farmers Rice has annual sales of
$50 million, or about 8% of ERLY's consolidated sales for
fiscal 1997.
- Various statements and materials distributed by the Powell
Group highlight operational experience in the rice business;
yet, other statements self- servingly deny any competitive
industry conflicts of interest between ERLY and the Powell
Group. In fact, the Powell Group's rice-milling subsidiary
is a direct competitor of American Rice, Inc., ERLY's
subsidiary. Both entities compete for rice from the same
farmers in Louisiana and Farmers Rice is a supplier of rice
to a major competitor of American Rice in Haiti. There would
clearly be numerous conflicts of interest if both entities
were managed by the same individuals.
- A recent press statement by the Powell Group deliberately
attempts to prejudice your perception of your Management by
claiming that the Company spends $1,000,000 a year "to rent
a penthouse on Wilshire Boulevard." The fact is that the
Company occupies typical corporate office space in Los
Angeles (where it has been headquartered for over 25 years)
which not only houses the corporate headquarters but also
personnel involved in the Company's west coast operations
for an annual rent of approximately $300,000. Management
believes that the rent is reasonable in relation to the
prevailing rental rates for comparable office facilities.
- The Powell Group has claimed that it can refinance
$99,000,000 of outstanding mortgage notes of American Rice,
Inc. at a lower interest rate. However, the mortgage notes
cannot be refinanced at a lower interest rate since they are
not currently redeemable and there are substantial
prepayment penalties if the notes are prepaid in any event.
Further, the prepayment of the notes would result in a
write-off and charge against earnings of approximately
$5,000,000 of deferred offering costs.
- The Powell Group have said they intend to install Nanette
Kelley as chief executive officer and John Spain (one of Ms.
Kelley's employees) as managing director of the Company if
they win control. Until two years ago, Mr. Spain was manager
of a television station in Baton Rouge, Louisiana. He has
never run a company like ERLY and has already admitted that
neither he nor Ms. Kelley knows anything about the
international rice business, a major part of the Company's
total business. Ms. Kelley, who is 38 years old, inherited
her family-owned company. She also has never run a company
like ERLY.
- The Powell Group have said they will relocate the Company's
rice business from Houston, Texas, and its corporate and
west coast operations headquarters from Los Angeles,
California, to Baton Rouge, Louisiana, Ms. Kelley's home
town, if they win control of ERLY. The
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success of ERLY, like that of all businesses, is totally
dependent on the skill, experience, and dedication of its
people and the relations of its people with customers and
suppliers. The actions the Powell Group intend to take if
they win control of the Company will undoubtedly result in
the loss of a number of loyal employees who are vital to the
Company's operations. This is particularly important in the
Company's international markets, where the Powell Group
admits it has no knowledge or experience, and where
experience, knowledge, and personal relationships with
customers and suppliers are even more critical than in
domestic markets.
- The Powell Group have said that they expect to spend
$750,000 in their takeover attempt. We assume they may spend
even more than that since we are aware they are flying
around the country in a private airplane and staying in
first-class hotels for meetings with shareholders. If the
Powell Group win control of the Company, they intend to
force the Company to reimburse Ms. Kelley's company for all
of their expenses without even asking for shareholder
approval. Most of that money, $505,000 plus expenses, will
go to Mr. Trenham's firm for help in soliciting proxies. The
Company simply cannot afford to pay all of those expenses,
not to mention the impact it would have on earnings and
stock value. Ms. Kelley wants to take control of your
Company at your expense without having to bear any of the
costs of the proxy contest that she and Mr. Trenham have
initiated.
- The Powell Group claim that the Company has lost its Saudi
Arabia rice market because of litigation with a rice
processor. That is simply not true. The Company has
alternative processing sources and is continuing to market
and sell its branded rice products in the Saudi Arabia
market without any reduction in volume.
DON'T BE PRESSURED OR DECEIVED BY THE POWELL GROUP
You will shortly be receiving your Management's proxy material in which these
issues will be explained in greater detail. We urge you to read the material
carefully. Once you have done so, please mark the WHITE proxy card by voting FOR
each of our proposals and sign, date and return it in the envelope provided. We
appreciate your ongoing support.
If you have any questions or comments, please feel free to call MacKenzie
Partners, Inc. which is assisting us with our solicitation, at (800) 322-2885.
Sincerely,
/s/ GERALD D. MURPHY
Gerald D. Murphy
Chairman
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