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Cracker Barrel mails definitive proxy for special meeting

- Staff Reports • Updated Mar 26, 2014 at 1:12 PM

Staff Reports

Cracker Barrel Old Country Store Inc. commenced mailing of its proxy statement for the company's special meeting of shareholders April 23.

In a letter to shareholders, Sandra B. Cochran, Cracker Barrel president and chief executive, addressed a number of claims made by Biglari Capital.

Cochran urged shareholders to vote against the proposals brought forward by Biglari Capital for the board to immediately pursue all potential extraordinary transactions, including the sale of the company, and take any action necessary to amend the Tennessee Business Corporation Act to permit Biglari Capital to engage in an extraordinary transaction with the company.

“The board unanimously believes that seeking an immediate sale of the company, as advocated by Biglari’s proposal, is not in the best interests of the company’s shareholders in light of current market conditions and the company’s sustained strong performance,” Cochran said in the letter.

On the call to amend Tennessee state law, Cochran said, “…the board does not have the power to amend Tennessee law. In addition, the board believes that the interests of all shareholders are best served by the management team continuing to focus on the execution of the company’s current operational and strategic plan, rather than engaging in a time-consuming and potentially expensive lobbying effort.”

Cracker Barrel will hold the special meeting of its shareholders at 9 a.m. at 1201 Pennsylvania Ave. NW, Suite 300 in Washington, D.C.

Under Cracker Barrel’s charter and by-laws, shareholders holding 20 percent of the company’s shares can call a special meeting. Biglari holds about 19.9 pervent of the company’s shares, and recently filed the regulatory forms necessary to solicit other shareholders to call a special meeting. The Cracker Barrel board voluntarily called the special meeting to avoid added cost and distraction of such a solicitation, Cochran said.

At each of Cracker Barrel’s last three annual meetings, Sardar Biglari nominated an alternative slate of candidates for election to the Cracker Barrel board. At each meeting, the Biglari nominees were defeated by significant and increasing margins, despite the fact that Biglari’s stake in the company’s common stock doubled over the same period.

In addition, at the 2013 annual meeting, Cracker Barrel shareholders also voted, by a wide margin, against a non-binding proposal publicly made by Biglari recommending the board approve a $20-per-share special dividend.

Despite the defeats, within about a month following the 2013 annual meeting, Biglari called for the company to “undertake a value maximization process by reviewing all potential extraordinary transactions, including the sale of the issuer…”

Biglari said if Cracker Barrel did not promptly commence a sale process, it intended to call a special meeting of shareholders to vote on a non-binding proposal recommending the board pursue an extraordinary transaction, such as the sale of the company.

In a Dec. 24 letter to Cracker Barrel Chairman James Bradford, Biglari continued to call for Cracker Barrel to review all potential extraordinary transactions, including the sale of the company.

The letter also said Cracker Barrel could take on leverage and effect a share repurchase, and Biglari would consider selling all of its shares if this happened. The letter closed by stating if Cracker Barrel did not take the recommended actions, Biglari would exercise any and all rights and remedies at its disposal, including seeking to call a special meeting of shareholders.

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