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Biglari still eyes Cracker Barrel

By Jared Felkins jfelkins@lebanondemocrat.com • Updated Jan 17, 2014 at 11:17 PM

Cracker Barrel Old Country Store Inc.’s largest shareholder continued his quest to gain a foothold on ownership of the company Thursday in sending a statement to shareholders asking for a vote on whether the company should be sold. 

Sardar Biglari, whose company, Biglari Holdings, owns Steak ‘N Shake, filed a solicitation statement with the U.S. Securities and Exchange Commission that went out to Cracker Barrel shareholders. 

The statement asks the shareholders to fill out and return a request card calling for a special shareholders meeting so a vote could be taken on whether to sell the Lebanon-based company. 

“Section 6.2 of Cracker Barrel’s amended and restated bylaws provides that a special meeting of the company’s shareholders shall be called by the chief executive officer, the president or the secretary of the company at the written request of any person or persons holding of record not less than 20 percent of all the votes entitled to be cast on any issue contemplated to be considered at such proposed special meeting,” Biglari’s statement said. “As of the close of business on Jan. 16, Biglari collectively beneficially owned, and had the right to vote, 4,737,794 shares of the common stock, representing approximately 19.9 percent of the outstanding common stock of the company.”

In the statement, Biglari asks shareholders to support the sale of Cracker Barrel and take any necessary action to amend the Tennessee Business Corporation Act to permit Biglari to buy it. 

About three weeks ago, Cracker Barrel board chairman James Bradford responded to Biglari’s recent demands the company be put up for sale.

Bradford said in a statement the board determined the continued execution of the Lebanon-based company’s existing business strategy is “currently the proper course of action for the long-term best interests of the company and its shareholders.”

“We are disappointed that Mr. Biglari is seeking to call a special meeting to vote on a proposal requesting that the company commence a sale process, particularly in light of his defeat by substantial margins in three consecutive proxy contests,” Bradford said in a statement. “Cracker Barrel’s board of directors continues to believe that the execution of management’s existing business strategy will create the most value for all shareholders. The board regularly evaluates all options to serve the best interests of the company and its shareholders and will continue to do so.”

Biglari, a week prior, upped the ante in his latest quest to persuade the company’s board of directors to sell the company. 

In a letter to 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.”

Biglari, three times rejected to be on Cracker Barrel’s board of directors, previously filed a letter with the SEC 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 the 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.”

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.

Cracker Barrel stock opened Monday trading at $111, but fell to $109.17 in mid-morning trading. Its stock price remains significantly higher than the 52-week low of $60.07.

Cracker Barrel was established in 1969 in Lebanon and operates 625 company-owned locations in 42 states. 

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