Cracker Barrel's Chance to Swat Away Biglari


Yawn! Another day, another attempt by Sardar Biglari to get management at Cracker Barrel to do something -- anything! -- he suggests. This time, he's offering to buy the company himself, or barring that, urging the company to initiate a buyback of his stock because, according to the SEC filing, "we would not want to leave our money in your care."

There are a few obstacles to Biglari acquiring the restaurant chain, not least of which is that laws in Tennessee, where Cracker Barrel is based, prevent hostile takeovers and would keep his Biglari Holdings from completing the deal. So if management would assent, he'd like it very much to help him get the law changed.

Earlier this year, Biglari rejected a Cracker Barrel offer to buy back his stock at prevailing market prices to get him to go away. Instead, he recommended the company buy back outstanding shares through a repurchase program or, if it had so much money to burn, initiate a special dividend. As Biglari remarked at the time, he was a buy-and-hold investor who had "one of the longest time horizons in the investment world." That benchmark is apparently just under a year. Of course, shares in the chain have appreciated about 70% since then, so his holdings would be worth substantially more now than they were at the time.

Cracker Barrel shareholders have also rejected his overtures. At the company's annual stock owners meeting last month, Biglari and his vice chairman were resoundingly defeated in efforts to take seats on Cracker Barrel's board of directors. His $20-per-share special dividend proposal was shot down, too.

It seems this latest effort is related at least in part to Cracker Barrel injecting itself into the kerfuffle between network A&E and the biggest reality show on cable, Duck Dynasty. After its star Phil Robertson was suspended for expressing deeply held religious beliefs regarding homosexuality, Cracker Barrel removed some of the show's branded merchandise from its stores -- only to run into a buzz saw of criticism from restaurant patrons who are fans of the show. Cracker Barrel quickly reversed course and restored the items to its store, but Biglari said the incident was "another example of poor judgment" by management.

Of course, Biglari's quixotic efforts to reform Cracker Barrel's management don't seem to be the most judicious use of judgment, either. Unlike Darden Restaurants, which at least tried to appease an activist investor by saying it would spin off its Red Lobster chain, Biglari seems to realize -- finally -- he's just butting his head against the wall. This latest proposal gives him a somewhat graceful way out.

Even though it might cost the restaurant chain more today than it would have earlier this year, Cracker Barrel might find it advantageous in the long run to pay now instead of having to continuously pay over time to rebut Biglari's recurring big ideas. It's obvious management will never sell the company to Biglari, so buying his shares could finally allow Cracker Barrel to rid itself of a gadfly that's been buzzing in its ear for too long.

A seat at the table
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