Cracker Barrel Old Country Store Inc.’s longtime battle with the activist investor Sardar Biglari, dormant for a year and a half, reappeared in recent days after the family-dining company asked shareholders to renew a shareholder rights plan to prevent Biglari from taking over the company.
Last week, Cracker Barrel asked shareholders to renew a poison pill adopted in 2012 that effectively prevents shareholders from acquiring more than 20 percent of the company. The chain adopted that plan at the time after Biglari bought up numerous shares through Biglari Holdings.
In Securities and Exchange Commission filings, the company made clear that it still feels Biglari is a threat to take over control of the chain. “As we sit here today, Biglari Holdings remains a threat,” the company said. “With a 19.7 percent ownership position in Cracker Barrel, we believe that Sardar Biglari desires a controlling stake in our company.”
Biglari on Friday responded with a filing of his own, saying that Cracker Barrel’s filing “was in no way provoked” and that it was unnecessary, as Tennessee law and Biglari’s own lending arrangements prevent him from buying more than 20 percent of the chain’s shares.
The chain is based in Lebanon, Tenn. Tennessee law, Biglari said, forbids shareholders from voting a single share above 20 percent ownership. Biglari Capital Corp.’s filing also says that it has a lending arrangement in which all of the $164.1 million in debt would come due if Biglari exceeds 20 percent ownership of Cracker Barrel.
Biglari’s filing also includes a mockup of a Cracker Barrel roadside billboard with one of the company’s famous rocking chairs, its logo and the phrase “Eat. Shop. Entrench. Next Exit.”
Cracker Barrel and Sardar Biglari have been doing battle since the summer of 2011, when the chairman of Steak n Shake owner Biglari Holdings first acknowledged an activist investment in the chain.
Biglari tried to get one or more seats on the Cracker Barrel board for three straight years in unsuccessful proxy fights. And then, in 2014, asked shareholders to have the company put itself up for sale. Shareholders rejected that plan, too.
There has been almost no back and forth between the two sides since then, until last week.
Cracker Barrel’s adopted its shareholder rights plan, otherwise known as a “poison pill,” before the second proxy fight with Biglari in 2012. Shareholders approved the pill. But the plan expired in April. The board adopted an identical plan and now must present it to shareholders for their approval, again.
In its filings, Cracker Barrel indicated that the plan would protect Cracker Barrel shareholders from the possibility that Biglari might take a controlling position in the company’s stock. The company said the plan encourages buyers to negotiate with the board to purchase the company, rather than take it over through stock purchases.
The company also criticized Biglari’s track record with his own company, Biglari Holdings, which owns Steak n Shake. That includes a license agreement that would pay Biglari 2.5 percent of Steak n Shake sales for the use of his name if Biglari were ever fired as CEO.
And it includes a more recent move in which his hedge fund, The Lion Fund used money from Biglari Holdings to buy up stock in the same company. The fund, which Biglari controls, now controls 49.5 percent of Biglari Holdings stock.
That tender offer followed a proxy contest that Biglari won “and now serves to effectively entrench Mr. Biglari’s position,” Cracker Barrel said.
Biglari doesn’t address those issues in his response, but notes that he hasn’t run for board seats since 2013 and “has not said a word to the public about the company in 18 months.”
And both sides agree on one thing: The chain’s performance over the past four years has been strong, including consistent sales and earnings growth, and a stock price that has more
But Biglari says that Cracker Barrel took many ideas that he initially proposed and adopted them, and that the company also responded to pressure he put on the chain.
Those efforts include an end to unit expansion, improvements in operating execution, changes in leadership and improved financial disclosure. Cracker Barrel has replaced its CEO and seven of nine directors since Biglari first got involved, the filing says.
The company also improved executive compensation, started licensing its brand and began returning excess capital to shareholders.
“Why has the board decided to attack its largest shareholder who is behind much of the company’s success?” Biglari’s presentation asks at the end.
Cracker Barrel currently has 660 units.
Contact Jonathan Maze at [email protected].
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