Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Cracker Barrel Old Country Store, Inc. (CBRL), Biglari Holdings Inc (BH): Three-Year Saga

Steak n Shake proprietor and long-running activist in Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) Sardar Biglari has not gotten his way in influencing the latter. On Monday, the Warren Buffett-idolizing investor attempted to gain two board seats for the third time in as many years. The result mimicked the previous two endeavors — struck down by shareholders and, eventually, the board. It’s an interesting and peculiar battle, as Biglari’s Biglari Holdings Inc (NYSE:BH) owns 20% f the company and has already made millions upon millions on the stock. Contrary to other activists’ actions, such as Bill Ackman’s at the plummeting J.C. Penney, Biglari is convinced change is needed at a company whose stock is up nearly 150% in just two years. What comes next for Biglari?

Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL)

Three-year saga

Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL)’s largest shareholder as of late has also been its most aggravating, as Biglari Holdings Inc (NYSE:BH)’ 20% stake has been used again and again as a vehicle for change in the roadside restaurant chain. Cracker Barrel management has used many of the common tactics to rid itself of Biglari’s presence — from a poison pill tactic (flooding the market with shares to avoid any one owner from gaining too much influence) to offering a direct buyout of Biglari’s shares—at a premium. The investor sits at 20% ownership today, undeterred by the poison pill, and publicly rejected the company’s attempt to buy him out.

The rest of the company’s shareholders have not had open arms, either. In the three occasions Biglari Holdings Inc (NYSE:BH) has asked for a board seat and voted his 4 million-plus shares in favor, he has never gained even a hint of widespread support from others. Why would they, considering the performance of Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) shares?

In a nutshell, the investor holds issue with the company’s capital allocation practices, and claims that the ROI on new stores is far lower than reported. Management obviously disagrees. But by putting up such a fight, and showing some degree of fear to the San Antonio-based investor, management validates his concerns.

With little chance of boardroom success, what are Biglari Holdings Inc (NYSE:BH)’s options?

Unlocking value

Biglari Holdings Inc (NYSE:BH)’s Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) stake is worth north of $400 million, representing a sizable chunk of his company’s entire market cap. One of the reason’s Biglari Holdings maintains a shackled valuation is the market risk of Cracker Barrel. If the position is monetized, at a steep profit to Biglari and shareholders, the investor could just wipe his hands of the stubborn management team and see his namesake company’s stock rise handsomely.

The other option is to double down efforts and get ready for next year’s shareholder vote. After three years of failure, it seems less and less likely that this is an option. For an investor of Biglari’s ability and prowess, there are undoubtedly other options in the market, even in the specific QSR space, his apparent wheelhouse.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.