The battle over Cracker Barrel (NASDAQ: CBRL) continues to heat up like an Old Timer's Breakfast on a cast iron skillet.


Image Source: Flickr/ Wei Tchou.

On December 30th, Cracker Barrel's board of directors fired back at the corporate takeover experts at Biglari Holdings (NYSE: BH). Sardar Biglari, the Chairman of Biglari Holdings, sent a letter to the board on Christmas Eve letting them know that his company would begin the process to buy Cracker Barrel outright after various proposals had failed to win support from both the Board of Directors and current shareholders.

The battle begins
Biglari Holdings now has a 20% ownership stake in the popular restaurant chain, worth almost $500 million, after two and a half years of aggressively buying the stock. Biglari has pushed his agenda for various reforms at the company, from issuing a special $20 per share one-time dividend, to taking on more debt, and has also reiterated his position that he believes current management is doing very poorly.

This is no longer a game. Source: Caitlin Regan

In his not-so-nice letter before Christmas, when he called for the company to be sold to new owners, he said bluntly; "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." 

He criticized the chain for its ability to run its business in a way that drove the most value to shareholders, saying "[w]e firmly believe that neither you nor your management has a deep understanding of how substantial value can be created." And he also highlighted the company's recent missteps surrounding its Duck Dynasty merchandise as "another example of poor judgment."

Cracker Barrel fires back
Yet Cracker Barrel did not sit idly as Biglari took another shot at management; it issued its own statement where it announced it would not give in to his demands.

The press release noted that while Cracker Barrel had considered Biglari's demands, it continues to believe that it is in fact currently operating down "the proper course of action for the long-term best interests of the Company and its shareholders." 

Source: Sarah Ackerman.

The chairman of Cracker Barrel, James Bradford, reiterated the position the company is taking in not following Biglari, and even highlighted past defeats as further evidence as to why it will not give in to the proposal. He said, "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."

There is no denying this battle is likely a long way from over -- but since Tennessee law prohibits some of the actions that Biglari is attempting to undertake, Cracker Barrel seemingly has the upper hand. Only time will tell who the final victor is, but clearly these two sides have dug in, and this may be a battle that continues for years to come.

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