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Biglari eyes Cracker Barrel

By Jared Felkins jfelkins@lebanondemocrat.com • Dec 17, 2015 at 5:40 PM

Sardar Biglari, the largest shareholder of Cracker Barrel Old Country Store Inc., on Tuesday upped the ante in his latest quest to persuade the company’s board of directors to sell the Lebanon-based company. 

In a letter to board chairman James Bradford, Biglari said Cracker Barrel’s board should undertake a value maximization process by reviewing all potential extraordinary transactions, including the company’s sale. 

“The board’s primary aim should be to sell to the highest bidder in order to create a realization of Cracker Barrel’s value,” Biglari said in the letter. “As the company’s lead investor, owning nearly 20 percent of the outstanding shares, we are willing to lead the process by submitting a bid. But, as you are well aware, Tennessee law currently restricts our ability to engage in such a transaction. Thus, we request that the board support our efforts to seek an amendment to the state law that would give all shareholders the ability to decide the future of their company.”

Nearly a week prior, Biglari, three times rejected to be on Cracker Barrel’s board of directors, filed a letter with the Securities Exchange Commission that called for a special shareholders’ meeting to vote on a non-binding resolution to recommend the board “pursue an extraordinary transaction” or Cracker Barrel’s sale. 

“The value of the business, or any business, depends on who is in control of the assets,” Biglari said in his latest letter. “We believe Cracker Barrel’s assets would be far more productive under our leadership than in the hands of present leadership. Thus, we are willing to purchase the business because we perceive a significant upside under our management. But other sophisticated buyers also should have the opportunity to bid for the company.

“We think Cracker Barrel’s earning power is far too low in your hands. Current management appears relatively successful because of the dismal performance under the former CEO. We firmly believe that neither you nor your management has a deep understanding of how substantial value can be created.”

Cracker Barrel’s stock price is up about 250 percent since he began buying shares in 2011. It closed Tuesday at $112.31 – a major jump from the 52-week low of $60.07.

Biglari also said in his letter, the handling of the Duck Dynasty controversy was “another example of poor judgment.”

Last weekend, Cracker Barrel said it pulled some Duck Dynasty merchandise from its stores over concerns it might offend guests.

“Cracker Barrel’s mission is Pleasing People,” the company said on its Facebook page. “We operate within the ideals of fairness, mutual respect and equal treatment of all people. These ideals are the core of our corporate culture. We continue to offer Duck Commander products in our stores. We removed selected products which we were concerned might offend some of our guests while we evaluate the situation. We continually evaluate the products we offer and will continue to do so.”

On Sunday morning, however, Cracker Barrel recanted its plans, and Duck Dynasty products returned to its shelves.

“We made a mistake, we listened to you, and we apologize. “#DuckDynasty products are back in our stores,” Cracker Barrel tweeted with a link to its Facebook page.

It was retweeted more than 2,500 times. 

“You told us we made a mistake. And, you weren’t shy about it. You wrote, you called and you took to social media to express your thoughts and feelings. You flat out told us we were wrong,” Cracker Barrel said on its Facebook page Sunday. “We listened. Today, we are putting all our Duck Dynasty products back in our stores. And, we apologize for offending you. We respect all individuals right to express their beliefs. We certainly did not mean to have anyone think different. We sincerely hope you will continue to be part of our Cracker Barrel family.”

Biglari controls more than 4.7 million shares of Cracker Barrel stock. 

At its annual shareholders’ meeting in November, Cracker Barrel shareholders voted overwhelmingly to reject Biglari and Philip L. Cooley’s bids to be placed on the company’s board of directors. Shareholders also rejected Biglari’s proposal that Cracker Barrel declare a special cash dividend of $20 per share, at a cost of about $476 million. Biglari suggested Cracker Barrel pay for the dividend by nearly doubling its current debt.

Cracker Barrel offered to buy Biglari’s stake for $300 million in February, but he refused.

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