The directors of Chicago-based Whitehall Jewellers are urging shareholders to reject a takeover offer from one of its shareholders, Newcastle Partners, for all of the outstanding shares of the company’s common stock for $1.20 per share.

The company had previously signed a deal with Prentice Capital Management that would provide up to 87 percent of its equity to Prentice in exchange for an influx of capital.

Robert L. Baumgardner, Whitehall’s newly appointed chief executive officer, said in a statement Newcastle’s offer “does not address how the company will have adequate senior financing going forward,” or address how the company will procure other financing or retain the support of vendors.

The company’s stockholder meeting to consider the Prentice Financing offer was scheduled to take place Jan. 19. Only stockholders of record as of Dec. 9, 2005, will be entitled to vote.

Baumgardner, 59, was recently named the company’s new president and CEO. Baumgardner was previously president of Little Switzerland, a subsidiary of Tiffany.

Whitehall, which runs 389 stores, expects to close 77 unprofitable stores in the near term. The stores posted operating losses of $5.1 million, the company said.

Baumgardner replaces Daniel H. Levy, who was serving as interim chief executive officer following the resignation of Lucinda M. Baier.

Last year, Whitehall was delisted from the New York Stock Exchange because its market capitalization was less than $25 million for 30 days. It is currently being quoted on the OTC Pink Sheets under the jwlr.pk symbol.

Whitehall has suffered a number of blows in recent years, including an accounting investigation and the death of chairman Hugh Patinkin last year. Former Zale president Beryl Raff briefly signed on as Patinkin’s replacement but eventually declined the job.