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Biglari Holdings Inc. Message Board

muhammetal 4 posts  |  Last Activity: Apr 29, 2014 1:58 PM Member since: Apr 10, 2013
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  • muhammetal muhammetal Apr 29, 2014 1:58 PM Flag

    I imagine once he got into Maxim, he didn't like what he saw and then decided to clean house. He said he has a Harvard MBA turd detector, so maybe he came across too many of those.

    He addressed the new First Guard incentive structure and said that Ed will have the opportunity to make more under BH's incentive program than he did by selling the firm to BH.

    With respect to SNS, he talked about the new managers he has recruited to take it to the next level. There is a person who came from Fed Ex and led a bar code project there, a distribution person who came from Advance Auto Parts, an HR person from JCP, and a person from Toyota University. It seems he's putting in place the infrastructure necessary to grow the number of restaurants.

    With respect to licensing, he mentioned that in Russia, there is a Maxim branded credit card and a Maxim restaurant, which he sees as evidence that the brand can work on different products. Also, he has plans for SNS brand licensing. He talked about how successful SNS chili is in wal mart stores in florida, and how they both want to expand it to other areas. Hi also mentioned a few additional products that are planned like a microwavable shake, frozen steakburgers, etc.

    I remember the Cooker!

  • muhammetal muhammetal Apr 26, 2014 5:40 PM Flag

    No problem, happy to share. They talked a lot about Maxim. It is the opposite of FG in that they won't meddle with FG and will allow old mgmt to continue running the business profitably, but they already fired all of maxim's mgmt and SB will now run it at a loss. They talked about how it has great potential to generate licensing revenue, similar to playboy, but also how they intend to make it more high brow, and made it clear that the playboy analogy ended with licensing revenue and did not include content. SB said he inquired about Maxim after reading in the newspaper that the sale fell through on feb. 14, and agreed to buy it a couple days later. They said they have already been offered more than they paid for Maxim, but turned it down because they see great potential in the brand. The publishing biz may never be profitable, but is a giant banner ad for the brand, off which they hope to make licensing revenue off products like booze, etc. Maxim is taking up a lot of SB's time now, but he seemed excited by its prospects.

  • muhammetal muhammetal Apr 26, 2014 10:16 AM Flag

    What they said about First Guard is that it's a"gem" of a business, so they jumped on the opportunity. (In the case of both First Guard and Maxim, the decision to buy was made very quickly and was not the culmination of a targeted search process that uncovered the target. Instead, with First Guard, SB said he heard about it on December 20th and two days later was meeting with the company. You get the impression, and they embrace it, that they fly by the seat of their pants and don't have a grand plan. FG is a short tail insurance company with basically no float, but underwrites profitably. They like the CEO, Ed, but he is very conservative. (The combined ratio has been under 100 for the last 15years, and in some years really low like in the 60s. They really don't intend to meddle with First Guard, and will let ed continue to do what he has been doing, except they will provide capital and backing. This will allow FG to grow and use less reinsurance. A big driver was to get an insurance company into the fold, which will give them the opportunity to learn the business and develop a rapport with regulators and rating agencies. Clearly, they are interested in a future acquisition and later, when asked about UNAM, said no comment, next question. ..
    On CBRL, they compared it to the rumble in the jungle and said it is only the third round. They are undeterred by the votes and explain it away as a consequence of TSR - total shareholder return. A high TSR has made the other shareholders content with current mgmt. They will continue to fight the good fight.
    I had a few laugh out loud moments where the size of his ego was on full display, like when he argued his comp structure is a bargain because other managers with his record for success would charge 2 & 20, but he is only taking 0 & 25.
    They would have used some rights offering cash on the two purchases. FG didn't come cheap. They were happy to pay the asking price and said price was not negotiated much.

  • muhammetal muhammetal Apr 25, 2014 12:06 AM Flag

    One of the most interesting bits of information provided at the meeting today was that Steak n Shake actually earns more float than does First Guard. This is because SNS generates float on gift cards, ($8.6 million currently) while First Guard actually has essentially no float per its business plan. Maxim is a long term project that will bleed cash for a couple years, but they see potential for a big payoff if they can leverage the brand and turn it into a licensing cash cow. SB is devoting a lot of time and energy to maxim. They are also spending money and devoting time and effort to build out the SNS franchising model and international operation, where they see a lot of opportunity, and some risk. Finally, SB and Dr. phil had a lot to say in defense of the compensation structure and transaction in which SB bought back Biglari Capital from BH, but not so much on the topic of the licensing agreement through which BH gets to use the Biglari name. They said the name Biglari caries weight when negotiating to buy a business like First Guard, but will not be used to rebrand the insurance co., and couldn't defend the 19 years of future payments to SB in the event of separation except to say it will prevent a schmuck from trying to come in and influence BH.

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