Maybe Sardar Biglari will get the hint this time. There are just so many ways Cracker Barrel Country Store (NASDAQ:CBRL) has told the activist investor, "It's not us, it's you," but he sticks around anyway and is affronted more times than we can count. But shareholders have tried again anyway, with a recent vote to overwhelmingly reject his call to put the restaurant chain up for sale.
Through his Biglari Holdings (NYSE:BH) holding company, Biglari acquired a 20% stake in Cracker Barrel and then tried to use his position to improve its capital allocation policies, including by getting two seats on the board of directors, having the board approve a $20-per-share special dividend, and calling for the above-mentioned sale of the company.
Biglari tried three years in a row to gain seats on the board, but each time shareholders rejected the advance, the last time being last year, when as many as 70% voted against it. That went for his special dividend idea as well, which came about after management offered to buy out his stake in the company at market prices if he'd just go away and leave them alone. Biglari said if they had so much money lying around, they should use it to make a payout to all shareholders.
After each rebuff, Biglari would come back with another suggestion. When investors told him to go pound salt with his dividend, he offered to buy the company himself, believing he could be more productive with the restaurant's assets if they were under his stewardship, but said if the board rejected that idea (which they apparently dismissed out of hand), they should reconsider their proposal to buy out his stake because he no longer had confidence in management and no longer wanted to entrust his money with them.
Of course, the state of Tennessee, where Cracker Barrel is domiciled, has laws on the books that prevent hostile takeovers of companies of the sort Biglari proposed, so the activist investor put up a nonbinding referendum for shareholders to vote on that would have the restaurant lobby the state to repeal those laws so he could take over the company. Along with the suggestion of putting the chain on the market, investors voted down the idea.
And not just voted down, but stomped on it, too. Cracker Barrel says preliminary results indicate approximately 70% of all the shares that voted were cast against both proposals, but if you removed Biglari's votes from the tally -- which obviously would be self-serving votes in favor of them -- some 92% of the votes went against both measures.
Seriously, can management and now shareholders tell Biglari in any clearer terms that their view of Cracker Barrel's future and his do not align? At some point, he's got to get the hint that he's merely waging a quixotic campaign with no hope of winning. The man's smart, he's turned in some remarkable performances with his own restaurants, and you don't get to his position by making mistakes too often. But eventually even Biglari Holdings' investors should wonder about this waste of resources.
These votes mark the fourth consecutive time Cracker Barrel shareholders have resoundingly rejected his proposals, and considering his prior efforts at gaining board seats that came to naught, Sardar Biglari has a remarkable record of failure. Both he and the restaurant chain should part ways, and it just may be to Cracker Barrel's benefit to reconsider buying him that one-way ticket he's looking for.