A proxy battle appears to be brewing at restaurant operator J. Alexander’s Corporation.

Privet Fund Management, which owns about 10 percent of the company’s stock and is J. Alexander’s second largest shareholder, issued an open letter on Thursday opposing the company’s recently announced plan to merge with a unit of Fidelity National Financial. It contends the merger agreement undervalues the company and is therefore not in the best financial interest of shareholders.

“We will not consent to part with our stake unless we are paid a full and fair value,” Privet Fund wrote.

Under the merger agreement, announced on June 25, J. Alexander’s board agreed to sell the company to American Blue Ribbon Holdings Inc., a newly created unit of Fidelity National, for $12 a share or a combination of $3 cash and one share of American Blue Ribbon’s stock. Although the offer represented a 21 percent premium to J. Alexander’s closing price of $9.90 the previous trading day, Privet said it doesn’t reflect the company’s growth prospects. The shareholder contends the company has been on a growth trajectory, with its stock surging to $9.90 from $5.12 last August.

Privet contends that the board’s decision to accept the Fidelity offer over others was “rife with potential conflicts.” It asks if other potential offers or suitors were willing to offer similar compensation and employment terms to the current management team as the Fidelity one did.

The shareholder also questioned why the board was in such a hurry to sell now, given that the company had generated 10 consecutive quarters of same-store sales growth. The offer, in its view, doesn’t place an adequate multiple on the stock based on the company’s current and future Ebitda, or earnings before interest, taxes, depreciation and amortization. “We simply have no confidence in the board’s ability or willingness to conduct a full and fair process,” Privet wrote.

The shareholder is taking legal action to back up its fight. It filed a complaint in Tennessee court demanding the company hold its 2012 annual shareholder meeting so that shareholders can vote on a slate of directors it is trying to get elected to the board. “In failing to hold the meeting by July 1, the company knowingly and intentionally violated Tennessee law in order to avoid the possibility of a shareholder referendum on the board’s effectiveness,” the group contends.

“We have no trust in the board, we have no trust in management, and as a result, we have no confidence that every step has been taken and will be taken to properly represent our interests,” Privet said.

Should the board be successful in indefinitely delaying its annual meeting “through litigation tactics or otherwise,” Privet has a contingency plan: It fired off a notice, informing the company it plans to call a special meeting of shareholders for the purpose of adding two seats to the company’s board. “The special meeting would enable shareholders to express their dissatisfaction with the current governance structure at a vote to take place within 90 days,” the shareholder said.

J. Alexander’s senior executives were not immediately available to comment