Biglari Holdings Inc (BH) May Get His Chance With Cracker Barrel Old Country Store, Inc. (CBRL)

Page 1 of 2

In contrast to Apple Inc. (NASDAQ:AAPL) CEO Tim Cook’s statement that hedge fund manager David Einhorn’s proxy fight against the company is a “silly sideshow,” Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) doesn’t seem to be laughing at the continued presence of Sardar Biglari of Biglari Holdings Inc (NYSE:BH). Coming around the bend and headed toward corporate elections for the third time now, Biglari may have his biggest chance yet of a major upheaval at the roadside country store and eatery.

Biglari Holdings Inc (NYSE:BH)Mover ‘n’ shaker
For those unfamiliar with Sardar Biglari, he is a self-proclaimed Buffett enthusiast who has followed a similar path — running a holding company to manage a quasi-hedge fund. He also runs a real hedge fund: the Lion Fund. Biglari Holdings Inc (NYSE:BH) is certainly different from Warren Buffett, though, in practice. He is known for pushing management’s buttons and taking an adversarial approach to ownership. The investor took over Steak ‘n Shake and Western Sizzlin’ — two companies that were drastically underperforming before Biglari took hold and have since improved dramatically. Biglari attempted to take over a Michigan insurer but was blocked by the state legislature. What may be most interesting, though, about the investor and CEO is that he’s just 35 years old. With that in mind, some believe Biglari Holdings could be a young Berkshire Hathaway Inc. (NYSE:BRK.A).

While many management teams will dismiss activist investors and downplay their roles in determining the direction of a company, Biglari’s latest target is still nervous about the investor’s power. Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) showed its hand recently by offering to buy Biglari’s 20% stake in the company to allow him “an efficient exit.” This move, would, in turn, remove Biglari and allow the company to operate outside his purview. The company gave him until Feb. 20 to respond, but he chose instead to immediately say no.

Why does Cracker Barrel want Biglari gone? In my opinion, because he raises valid points regarding the company (which is trading at multiyear highs) and may finally persuade fellow common shareholders to put him on the company’s board.

The pitch
Why mess with a company that seems to be performing so well? Biglari believes the company may be misrepresenting its strong performance. In Cracker Barrel’s last earnings statement (the next one is due out Feb. 26), the company cited new restaurant ROI of 16.2%. Biglari found that to be glaringly inaccurate, saying that he had done his own calculations and came up with 3.7% after depreciation and general expenses. Using a drastically inflated ROI as support for opening new stores would obviously destroy shareholder value.

Cracker Barrel rejected the notion of faulty accounting, and Biglari has yet to win his board seat. But with the not-so-subtle “please leave us alone” gesture that management just pulled, the activist may have just gotten his biggest piece of ammo yet. It would be one thing if the company initiated a large buyback plan open to all shareholders, but this was just a little special one for Biglari’s shares only. It is clear that Cracker Barrel management is afraid. You certainly wouldn’t hear Tim Cook offering to buy Einhorn’s shares (though they should do something similar).

Current Cracker Barrel investors need to think long and hard about what happened this week. Shareholders do not want to get caught in the middle of possible corporate wrongdoing — that’s a one-way ticket to epic losses.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!