|Activist Investor Biglari Grabs More Shares Of Cracker Barrel 02/17 02:45 PM --Biglari bought an additional 161,691 shares of Cracker Barrel over past week to boost ownership to 15.2%|
--Cracker Barrel shareholders rejected poison pill with 10% trigger in December
--Cracker Barrel reports quarterly earnings Tuesday morning
By Annie Gasparro
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Activist investor Sardar Biglari, of Biglari Holdings ( BH:$412.404,0$0.704,00.17%) ( BH), has continued to slowly but steadily buy shares of Cracker Barrel Old Country Store Inc. ( CBRL:$55.60,00$1.395,02.57%) since the restaurant chain's shareholder-rights plan was overturned by shareholders in December.
Biglari, who has been described as a Warren Buffett devotee with the activism of Carl Icahn, has raised his stake of the rustic-restaurant chain to 15.2%, from the 9.99% that sat just below the 10% trigger on the company's former shareholder-rights plan. Shareholder-rights plans, also known as poison pills, are designed to thwart hostile takeovers.
At Cracker Barrel's annual meeting in December, shareholders rejected Biglari's attempt to gain a seat on the company's board. However, the company's shareholder-rights plan didn't receive enough votes to pass. That plan included the 10% poison pill trigger and had been in place since September to prevent Biglari from buying up more shares.
Since the poison-pill barricade has been torn down, Biglari has bought roughly 800,000 more shares of Cracker Barrel through multiple smaller purchases, including a 161,691 share grab over the past week. Biglari Holdings ( BH:$412.404,0$0.704,00.17%) didn't return a request for comment.
Tuesday morning, Cracker Barrel will release its financial results for its fiscal second quarter, which ended Jan. 27. In light of the upcoming release, the company declined to comment on Biglari's recent purchases. Cracker Barrel's stock has risen about 10% so far this year, and was up 2.7% at $55.66 in recent Friday afternoon trading.
Last fall, Cracker Barrel began pushing shareholders to adopt the poison pill at its annual meeting Dec. 20. The board argued the strategy, which makes it financially unattractive for a shareholder to buy enough of the company to trigger the pill, would prevent Biglari from acquiring up to half of the company, which Biglari had just received clearance to do from antitrust regulators.
However, Biglari said at that time he intended to keep his ownership well under 20% and wasn't "seeking to acquire control of Cracker Barrel." Plus, a Tennessee law prevents shareholders who acquire more than 10% of a company without the board's approval from buying the whole company through any means-- whether an acquisition or a direct offer to shareholders--even if the board later approves it.
"You can influence the company, using your shares to elect directors, and you can try to influence the board to do a transaction with an unrelated party, but you can't take over the company yourself," Jon Stanley, a securities law attorney at the Nashville law firm H3GM, said. Stanley said for Cracker Barrel, the pill was a failsafe to the Tennessee law. "The idea is that it can't hurt to have another arrow in your quiver, in case anyone ever challenges the Tennessee statute and it's found unconstitutional," he said. Without the poison pill, Cracker Barrel is relying on the state's regulations.
Last summer, Biglari began pushing for changes in the way Cracker Barrel is run and the way it reports its profits, citing chronic underperformance and excess spending as reasons to vote himself on to the board. While Biglari said his ownership of Western Sizzlin and Steak 'n Shake restaurants made him relevant and experienced for the job, Cracker Barrel said it was a conflict of interest.
In response to Biglari's criticism, Cracker Barrel began reporting its restaurant and retail sales separately last year. For the quarter that ended Oct. 28, the company reported declines in same-store sales and guest traffic at its restaurants, while same-store sales at the attached retail stores also fell. However, Cracker Barrel said in November, its same-store sales rose 1.2% at the restaurants and 2.7% in its retail stores.
-By Annie Gasparro, Dow Jones Newswires; 212-416-2244; annie.gasparro@ dowjones.com