Last week, as my colleague Joe Guszkowski reported, the activist investor Sardar Biglari filed documents revealing that he has nominated a pair of people to the board of Cracker Barrel: Kevin Reddy, the former CEO of Noodles & Co., and former Bloomin’ Brands executive Jody Bilney.
This of course is not Biglari’s first rodeo, certainly not with Cracker Barrel. This proxy will make it a full half-dozen such fights between Biglari and the family-dining chain, with each successive fight less successful than the rest.
It’s an unusual level of interest in the chain by an activist investor—there is almost no situation quite like it. As such, we thought we’d offer a history of Big’s interest in Cracker Barrel.
2011: The Big Threat
On June 13, 2011, Sardar Biglari’s Biglari Holdings revealed a 9.3% activist investment in Cracker Barrel. At the time, Big’s reputation was at its peak. He three years earlier won a proxy fight to get on the board at Steak n Shake and was soon named chairman. Using a go-cheap strategy, the burger chain’s sales turned around and he was being touted as a “Baby Buffett,” comparisons he did nothing to discourage (given that he changed the company’s ticker to BH, the same initials as Warren Buffett’s Berkshire Hathaway).
Biglari then unleashed everything he had at Cracker Barrel, using the same technique he used at Steak n Shake and before that Friendly’s. He started a website (enhancecrackerbarrel.com) and began sending regular releases and letters to shareholders critical of everything at the company. He then nominated himself to the board after rebuffing a company settlement offer that would let him appoint two independent directors. Biglari called the offer “disingenuous.”
Cracker Barrel made numerous changes at the company, notably replacing CEO Michael Woodhouse with Sandra Cochran.
Biglari would win the endorsement of one of the major proxy advisory firms, Glass Lewis. Yet he received 6.5 million shareholder votes, well below the 12 million the director he was competing against received. It’d be the closest he’d get.
The biggest concern among shareholders is that Biglari would do what he did at Western Sizzlin and then Steak n Shake: Use his position on the board to engineer a merger with his existing company. In so doing, Big would be engineering a corporate takeover without paying shareholders a premium. That is a big no-no on Wall Street. And it’s the biggest reason for his consistent losses.
2012: The Sequel
Most activists at this point would have given up and taken whatever returns they could get. Instead, Biglari bought more shares over the first several months, ultimately more than doubling his holdings of Cracker Barrel to nearly 20%.
By late summer, Biglari asked Cracker Barrel to appoint both himself and his vice chairman, Phil Cooley, to the board, because when you can’t get a single seat, why not try for two the next time? Cracker Barrel again offered Biglari the opportunity to appoint independent directors, which he refused again.
Instead, he ignited a proxy to get himself and Cooley to the board. Biglari and Cooley each received 5.6 million votes, or 900,000 fewer then the first time, even though they owned more than double the shares they owned in 2011.
2013: Again?
Biglari once again nominated himself and Cooley to the board. And once again the board said no, though this time without the apparent prior offer for independent nominees. But this time, Biglari had another idea: Cracker Barrel should pay a one-time special dividend of $20 per share.
Biglari Holdings controlled 4.7 million shares at the time, making such a dividend worth about $94.8 million.
Biglari, Cooley and the $20 dividend received 5.9 million votes, slightly better than the previous year, in fact. But only 1.2 million of those came from someone other than Biglari.
2014: The strategic alternatives vote
After three attempts to get board seats, and three refusals, Biglari tried something different: The company should instead explore strategic alternatives to sell the brand to someone else.
This time, the special vote was held in April. It received 5.7 million votes and 14 million against. Only 1 million non-Biglari shareholders wanted the company to explore a sale process.
It would be the right decision, by the way: Cracker Barrel stock would rise another 60% in the years after this.
2015-2019: The quiet period
For several years, Biglari sat back and did other things. He bought up insurance companies and oil companies and suddenly had to deal with a struggling Steak n Shake, all of which occupied most of his time. He also sold more than half of his company’s stake in Cracker Barrel.
That quiet period came to an end in 2019, when Biglari asked for information on Cracker Barrel’s acquisitions of Punch Bowl Social and Maple Street Biscuit Co.
2020: The Punch Bowl proxy
Biglari came out of proxy retirement during the pandemic to take another shot, this time offering up Raymond Barbrick, who was the co-CEO of franchisee The Briad Group. Biglari’s primary issue: Cracker Barrel wasted money in its acquisition of the eatertainment chain Punch Bowl Social, which filed for bankruptcy at the outset of the pandemic after the family dining chain pulled its investment.
Biglari’s performance in this shareholder vote was his worst yet, by far. Barbrick received less than a half-million non-Biglari votes, or less than 3% of the non-Big votes cast.
2021-2022: Here we go again
Biglari is trying yet again, for a sixth time, offering up Reddy and Bilney, two apparently independent directors with no association with Biglari Holdings—something Biglari might have had 10 years ago had he simply not demanded to be on the board himself.
Biglari has made hundreds of millions on the gain in Cracker Barrel’s stock price and dividends paid over the years.
Yet he continues to do this because he believes Cracker Barrel will do what he wants them to do if he regularly tries for board seats. But at this point he is simply wasting everybody’s time.