Seeking to avoid a third straight proxy contest with its largest investor, the board of Cracker Barrel Old Country Store this week formally offered to buy back Sardar Biglari's more than $300 million of stock at market prices.
In a Valentine's Day response, Biglari said he's having none of it.
Cracker Barrel's offer came in the form of a letter from Chairman Jim Bradford and President and CEO Sandy Cochran. (The company last November also floated the buyout idea, apparently verbally.) In that letter, they say Cracker Barrel — which has spent about $10 million in the past two years fighting off Biglari's efforts to gain a board presence — could promptly pull off the purchase of Biglari's 4.7 million shares and help him book a $70 million profit on his investment. Selling off his shares over time, they write, would come with a significant discount.
"In each of the last two years, you rejected our good faith settlement offers of two board seats for independent directors chosen by you. Given this history, we assume that you remain intent on seeking a Board seat for yourself personally, despite the clear preference of our shareholders to the contrary," Bradford and Cochran wrote. "As an alternative to another proxy contest, we believe the buyback transaction we propose here would serve the best interests of the Company and our shareholders."
But Biglari, who has long said he intends to be a long-term shareholder, has quickly shot down the idea, saying "no reason exists for the Board to waste time with utterly useless distractions." In a letter Thursday, he said he remains focused on improving Cracker Barrel's operations and wants to see it use its capital wisely. If, he adds, the company really does have $300 million to deploy quickly and efficiently, it should launch a public tender offer for 20 percent of its shares or issue a special dividend.
"The Board ought to be preoccupied with optimizing long-term value on a per share basis, not concerning itself with 'monetizing' our stake," Biglari wrote. "I insist that you spend less time on such ineffectual matters and more effort on creating shareholder value through operational improvement and secondarily instituting better capital allocation policies."
Shares of Cracker Barrel (Ticker: CBRL) closed Thursday trading at $65.33, down slightly on the day. They've risen about 5 percent in the past six months and about 25 percent since Biglari first disclosed his stake in the company in May of 2011.