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Biglari Holdings Inc. Message Board

  • smaycs4 smaycs4 Feb 15, 2013 9:15 AM Flag

    Biglari: Not Interested in Cracker Barrel Repurchase Not Offered to All Holders

    Biglari: Cracker Barrel Has Twice Offered to Repurchase Stake
    Biglari Plans to Remain Long-Time Holder at Cracker Barrel
    Biglari Suggests Special Dividend or 20% Tender at Cracker Barrel 02/15 06:59 AM


    Cracker Barrel Old Country Store Inc.'s (CBRL:$65.33,00$-0.02,00-0.03%) efforts to shake off its largest shareholder appear to have fallen flat.

    The country-style restaurant and retail chain faced proxy contests in 2011 and 2012 from Sardar Biglari'sBiglari Holdings Inc. (BH:$367.78,00$2.58,000.71%) , which currently owns roughly 19% of the company, as Mr. Biglari unsuccessfully fought to gain a seat on Cracker Barrel's board.

    Biglari disclosed in a filing with the Securities and Exchange Commission that Cracker Barrel has tried twice since November to buy out his stake at market price, valued at about $300 million. Mr. Biglari quickly rejected the notion, saying he intends to be a long-term shareholder.

    In a letter to Mr. Biglari this week, Cracker Barrel executives said they " respect" Biglari's ownership, but said the two proxy fights "imposed significant financial costs on the company and diverted meaningful time away from focusing on the strategic plan and maximizing shareholder value by our board and management team."

    The executives said they were acting in the best interests of their shareholders and sought to avoid a third consecutive "costly and disruptive" proxy battle. They added that they spoke with other shareholders who encouraged the company to provide Mr. Biglari an opportunity to exit its position, which-- at market price--would net Mr. Biglari $70 million appreciation since he first bought the stock in 2011, Cracker Barrel said.

    Mr. Biglari responded the next day, saying he has no interest in exiting his position and remains committed to owning the stock "for the long run."

    He said he had no interest in a stock buyback that isn't offered to all shareholders and suggested Cracker Barrel instead use the funds for a tender offer of 20% of outstanding shares or a one-time special dividend.

    "My desire is to see management succeed in its endeavor because the value of our investment is predicated on leadership's performance," Mr. Biglari wrote. " Therefore, no reason exists for the board to waste time with utterly useless distractions and, more important, the waste of shareholders' resources."

    A Cracker Barrel representative wasn't immediately available to comment.

    Cracker Barrel had been struggling with chronic guest traffic declines coming out of the recession. But, at the prodding of Mr. Biglari, Cracker Barrel has started a handful of turnaround initiatives under Chief Executive Sandra Cochran, including cost-cutting efforts as well as a reworked menu and marketing strategy to focus on value-oriented and younger customers.

    Despite recent financial improvement brought on by those changes, Mr. Biglari and Cracker Barrel's management have continued to clash. Management, though, has rebuffed his advances, citing potential conflicts of interest and legal issues, given his ownership of rival chain Steak 'n Shake.

    In November, Cracker Barrel reported its fiscal first-quarter income shrank slightly as higher expenses offset improved same-restaurant sales.

    Shares closed Thursday at $65.33 and were inactive premarket. The stock is up 22% over the past 12 months.

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435.21-4.79(-1.09%)Feb 27 4:03 PMEST

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