Here we go again. Sardar Biglari is back, telling Cracker Barrel (CBRL 5.11%) that it needs to consider selling itself to maximize shareholder value. Considering that the board of directors has routinely rejected his appeals, and last month, fellow shareholders resoundingly defeated his entreaty for a $20-per-share special dividend, the possibility that this time the restaurant chain will act on his advice seems remote, at best.
In a filing with the SEC the other day, the activist investor said his Biglari Holdings (BH 2.10%) had acquired a near-20% stake in Cracker Barrel, or 4.7 million shares, but he doesn't think the board is up to the task of maximizing shareholder value. He proposes the restaurant "undertake a value maximization process by reviewing all potential extraordinary transactions, including the sale" of the chain.
If Cracker Barrel fails to act on his suggestions, Biglari is threatening to call a special meeting to vote on the sale, a proposal I'm sure has the board worried.
It's an interesting argument, because Biglari says he obtained his 19.9% stake at a cost of $241 million, but the value of the holdings at the end of the holding company's fiscal year stood at $485 million, and it collected some $18.4 million in dividends along the way. No doubt a portion of the 72% increase in Cracker Barrel's share price over the past year has come, in part, from Biglari's big-block buying spree, and talking up strategic alternatives, but it seems that management is achieving some pretty good value maximization on its own.
Biglari owns and operates two other restaurant chains, Steak 'n Shake and Western Sizzlin', but activist investors, in general, have been getting more vocal these days, and the restaurant business has been one segment that's seen a lot of action. Bob Evans Farms is being pressured by Sandell Asset Management, which owns 5.1% of the restaurant chain's stock, to separate its restaurant business from its packaged-goods division, and earlier this year, activist investors took an interest in Famous Dave's and Tim Hortons. Just yesterday, Darden Restaurants bowed to pressure from Barington Capital Management and said it will explore the spinoff or sale of its ailing Red Lobster chain.
Sometimes, the recommendations appear to have merit, such as Barington's argument that Red Lobster and Darden's other mature dining concept, Olive Garden, need a different management team than its high-growth concepts, like LongHorn Steakhouse and Yard House. Other times, in the words of Shakespeare's Macbeth, they seem "a tale told by an idiot, full of sound and fury, signifying nothing."
Biglari's no idiot, but Einstein once remarked that the definition of insanity was doing the same thing over and over again and expecting different results. Cracker Barrel's repeated rebuffs of his advances -- from both management and fellow shareholders, not to mention management's stated willingness to buy back his shares if he'd just go away -- should tell him that he's not going to get very far no matter how many bites of the apple he wants to take.
