What is in this article?:
- Legal expert evaluates Cracker Barrel, Biglari board battle
- Biglari a 'determined adversary' for board
Cracker Barrel shareholders brace for the activist investor’s third consecutive proxy fight over board seats.
Christopher P. Davis
Sandra B. Cochran, president and chief executive, strongly urged shareholders in a letter sent Thursday to vote for the board’s nominees at the company’s just-scheduled Nov. 13 annual meeting.
“Your vote will be especially important at the annual meeting,” Cochran wrote.
Lebanon, Tenn.-based Cracker Barrel has 624 company-owned locations in 42 states.
Last month, Cracker Barrel’s board voted not to support the proposed nomination by Biglari’s Lion Fund II L.P. of himself, as chairman and chief executive of Biglari Holdings Inc., an affiliate of Lion Fund, and Philip Cooley, the vice chairman of Biglari Holdings. San Antonio, Texas-based Biglari Holdings owns the Steak ‘n Shake and Western Sizzlin brands.
The Lion Fund and affiliates own more than 4.7 million of Cracker Barrel’s 24 million outstanding shares, or nearly 20 percent, and Biglari made efforts in 2011 and 2012 to gain board seats.
In Securities and Exchange Commission filings Thursday, Cracker Barrel said Biglari garnered about 36 percent of the votes needed to gain a board seat in 2011. In 2012, he targeted two seats and received about 29 percent of shareholder votes.
Christopher P. Davis, chair of the mergers and acquisitions and investor activism groups at the New York-based Kleinberg, Kaplan, Wolff & Cohen P.C. law firm, recently spoke with Nation’s Restaurant News about Biglari’s third attempt at gaining seats on the Cracker Barrel board.
Davis, who represents activist investors and funds but is not involved in the current Cracker Barrel-Biglari efforts, said Cracker Barrel has acted on many of Biglari’s early criticisms. “They’ve stolen some of his thunder by adopting and embracing his ideas without embracing him,” Davis said.
What makes this case atypical?
The board, in no uncertain terms, says no. Again. The obviously interesting part is that it is very rare in these types of things to have a board fight for a third consecutive year. Nonetheless, Biglari has chosen to go out and do that. You are in a situation where the board sort of, to be honest, handily won last year.
How has it gotten this far?
I think to a certain extent you could argue that Biglari is a victim of his own successful ideas. I personally think it was the pressure he put on [Cracker Barrel] in the first year that really provided the impetus for this board to turn things around. You look at the market price of the stock, and you look at how things have changed, and the board has a plausible case to make that things have improved.
Now you are in a situation that having accepted, in effect, the ideas, or the spirit of the ideas — it made changes that are positive — it takes some of the pressure off [shareholders] to put him on the board. The shareholders plainly didn’t embrace him last year. Unless there is going to be something new as this fight balances out, it is going to be hard to come out with a different result without putting in a fairly different input and a different set of arguments.