Steak n Shake
HBK makes a move
The investment group, led by HBK Investments LP, reported buying 2.7 million shares in Steak n Shake, equal to 9.5% of the 28.5 million shares outstanding. The shares were purchased between April 30 and May 22. HBK is one of the world's largest hedge fund managers, with more than $13 billion in equity capital.
The SEC filing sounds very friendly. It explains that the investment group intends to "engage in discussions with management ... with regard to strategies and potential transactions to maximize shareholder value, including potentially exploring an acquisition or other transaction."
It goes on to state the investment group does not intend to seek Board representation or engage in a transaction not supported by the Board -- very friendly indeed. Of course, once those "discussions" get under way, the gloves have a way of coming off.
A good target?
Some hedge funds make their money by identifying underperforming companies that have intrinsic value which can be unlocked. In retail or restaurant companies, that usually means a good brand that's lost its way. Steak n Shake fits that description to a T. The company has reported seven consecutive quarters of negative comp sales. A glance at last year's annual report reveals a management team with a pretty muddled strategic plan to revive the business.
On the other hand, the company fills an interesting niche in the fast-food market -- big, greasy, and unusually tasty burgers. Its fries are skinny, crisp, and tantalizing. The major players like McDonald's
Hedge funds have had some notable success in righting the ship at floundering retail chains, since they can bring clear strategic focus and superior management to the table. Earlier this month, Back Yard Burgers
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Fool contributor Timothy M. Otte surveys the retail scene from Dallas. He welcomes comments on his articles, but doesn't own shares of any companies mentioned in this article. The Fool's disclosure policy has real meat to it.