Steak ’n Shake CEO Biglari battles rival activist over burger joint
The tables have turned on Sardar Biglari.
The corporate activist — known for knock-down, drag-out proxy fights to include Steak ’n Shake in 2008 — is now battling a rival activist to keep control of the burger joint.
And with the dueling scourges of the C-suite attacking each other, the degree of animosity is unusual even in the down-and-dirty world of corporate coups.
Leading into the company’s April 9 annual meeting, Biglari, the CEO of Steak ‘n Shake parent Biglari Holdings, is busy trying to fend off Groveland Capital, which is attempting to unseat Biglari’s entire six-member board.
“We believe Mr. Biglari understands that shareholders of Biglari Holdings are not happy with his outsized compensation, his use of company assets to buy shares of the company over which he has sole voting control, and poor corporate governance that, among other things, allows continued conflicts of interest that benefit Mr. Biglari,” Groveland wrote in its most recent salvo Thursday morning.
There’s no shortage of nasty letters and harsh words either from Biglari, who used a similar playbook to gain control of Steak ’n Shake.
“Groveland is investing $1 million in an effort to take over a $1 billion company for its own benefit,” Biglari Holdings said in its most recent missive Wednesday.
Meanwhile, Groveland is challenging Biglari’s claim of transforming Steak ‘n Shake during his six-year tenure from “a nearly insolvent, money-losing restaurant chain on the brink of bankruptcy.”
“It’s a convenient `hero rescues town’ narrative,” counters the Minneapolis-based hedge fund.
But the reality, according to Groveland, is Steak ‘n Shake generated $31.7 million of Ebitda, or earnings before interest, taxes, depreciation and amortization — enough to cover interest obligations an extremely healthy 11.7 times — during the same fiscal year Biglari embarked on his self-styled turn-around.
That the fast-food chain CEO has transformed Steak ‘n Shake is beyond doubt.
Biglari changed the name of the San Antonio-based restaurant chain to his own a month after acquiring Western Sizzlin in March 2010. He then added to Biglari Holdings by acquiring lad-mag Maxim in February 2014 and First Guard Insurance in March 2014.
The executive also had Biglari Holdings buy his own investment company in April 2010 for $4.2 million, only to buy it back from the holding company in July 2013 for $1.7 million.
The real head scratcher, though, is Biglari Holdings’ investing $552 million in Biglari’s investment company after its ownership reverted to the CEO.
According to Groveland, the investment company has since used some of the $552 million to buy stock in Biglari Holdings.
This use of the company’s capital has had the perverse effect of boosting the voting authority of Biglari the CEO to 19 percent of Biglari Holdings — even though he personally owns just 1.5 percent.
The purchase of stock in Biglari Holdings with capital that belongs to Biglari Holdings has not been lost on Mario Gabelli’s GAMCO Asset Management.
As Biglari Holdings’ second-largest shareholder, GAMCO recently asked Biglari the CEO how he planned to vote the company stock financed by the company but overseen by his investment company.
“If those shares abstain, GAMCO, on behalf of its clients, intends to support the incumbents,” the Gabelli fund wrote in a letter viewed by The Post.
“[But] if those shares do not abstain and are directed to vote for the incumbents, GAMCO will look more favorably upon the slate of directors intended to be nominated by the Groveland group.”