Cracker Barrel Urges Shareholders to Reject Biglari Nomination to Board of Directors
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Begins Mailing Proxy Statement for
December 20 th Annual Meeting - Mails Letter to Shareholders that Questions Biglari's Motives, Business Conflicts and Objectives
- Cites Company's New Management and Board Members and New Financial and Operational Initiatives
"We believe that his track record speaks for itself, and we have serious
concerns about his motives, potential business conflicts, and ultimate
objectives,"
"We are already making excellent progress. We have had sequential improvement in traffic and sales during the first quarter, and improved earnings per share compared to our previous expectations. We believe this demonstrates the early success of the six strategic priorities that we outlined at the beginning of this fiscal year."
"Unfortunately,
In particular,
"We believe that if you want to know what
"In contrast, your Board has delivered strong long-term results, and continues to move aggressively to continue to create shareholder value. We are confident that Cracker Barrel is on the right path — with new leadership and new initiatives — to capitalize on the power of its outstanding brand.
"We urge you to vote the WHITE proxy card today to elect the Cracker Barrel nominees and protect your interests."
Text of Letter from
Dear Fellow Cracker Barrel Shareholder:
By now you may have heard that
We are writing to explain these concerns and to update you on the
strategic steps that your Board and management team have taken this year
to continue our focus on performance and shareholder value. Please take
the time to read and consider the facts so you can make an informed
decision on this important matter when it is brought to a vote at our
annual meeting on
It is important to bear in mind that your experienced Board of Directors — with four new members — has set a course for the Company that builds on Cracker Barrel's strengths, and strives to drive performance and keep us positioned at the forefront of our peers over the long term. Our new management and our important new financial and operational initiatives, designed to continue creating value for shareholders, are integral components of this strategic plan.
We are already making excellent progress. We have had sequential improvement in traffic and sales during the first quarter, and improved earnings per share compared to our previous expectations. We believe this demonstrates the early success of the six strategic priorities that we outlined at the beginning of this fiscal year.
Unfortunately,
We believe
-
Hidden agenda:
Mr. Biglari has repeatedly said he has specific plans for our business, but has consistently refused to disclose those plans, even to members of our Board's Nominating Committee when they flew toTexas to meet him. We believe this calls his true motives into question, and we are concerned that he has a hidden agenda. - Potential for competitive harm: We believe that having the CEO of a competing family restaurant company, Steak 'n Shake, on our Board would create serious business and legal conflicts of interest.
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Historical pursuit of control with no control
premium:
Mr. Biglari describes his holding company, Biglari Holdings, as a vehicle for acquisitions of controlling interests in other companies. And he has engaged in proxy fights to gain board membership, and ultimately seize control, without paying a change-of-control premium. - Short-term business horizon: He has slashed operational investment at Steak 'n Shake, and we believe he is focused on short-term results at the expense of growth and reinvestment. This is not the path to long-term success.
- Self-centered focus: We believe Mr. Biglari has pursued an agenda of personal benefit and self-interested transactions at Biglari Holdings, at the expense of other shareholders. These include proposing an excessive compensation package for himself, as well as a dual-class voting structure that could allow him to increase his voting control without making any additional monetary investment.
In contrast, Cracker Barrel's new strategic path builds on its strong and proven track record of creating shareholder value.
We are pursuing six new strategic initiatives that are already showing
results: a new marketing and advertising campaign, a refined menu with
new pricing, an enhanced restaurant operating platform, a refined retail
assortment, focused cost reduction and a balanced approach to capital
allocation, which includes a recent 14% increase in our cash dividend
and a new
The initiatives implemented to date have already contributed to sequential improvement in traffic and sales in the first quarter, and improved earnings per share compared to our previous expectations. We recently raised our full-year earnings guidance based on the success of these initiatives to date.
Cracker Barrel has a powerful brand and a winning concept that consistently wins top industry honors. Moreover, our initiatives demonstrate that we have the game plan and leadership to drive performance in a challenging economic environment — just as we have outperformed our peers and the market over the long term. Specifically, our five- and ten-year total shareholder returns exceed those of our peer group and the S&P 500 index. Our strategy has also resulted in a more attractive return on invested capital than have those of our peers, including Biglari Holdings.
We have also added experienced and committed new leadership:
- Since June, your Board has added three new highly qualified independent directors, and our new CEO. As part of our Board transition, two long-standing directors will not seek re-election at the 2011 Annual Meeting.
-
Our new CEO,
Sandra B. Cochran , has announced an aggressive plan to ramp up guest traffic, sales and profits in 2012. Having been both CFO and COO of Cracker Barrel, as well as the CEO of a large retailer, she has intimate knowledge of the business, and her plan is founded on direct experience. -
Our new CFO,
Larry Hyatt , brings significant experience in both full-service restaurant and retail businesses.
Biglari's
- Won a proxy fight
- Took control as incumbent directors exited
- Became Chairman and CEO
- Merged the company with Western Sizzlin' (which he had previously taken over) and with his own hedge fund
- Re-named the company Biglari Holdings — after himself
Given these concerns, your Board decided that we needed to act to
protect your investment. After Biglari Holdings received regulatory
clearance to increase its stake in Cracker Barrel to 49.99 percent, we
implemented a temporary shareholder rights plan. This is intended to
protect you from abusive takeover tactics that would not treat all
shareholders fairly. This rights plan has a limited term of three years,
subject to your approval, and is shareholder friendly because it would
not be triggered by cash offers for all shares that are open for 60
business days. In addition, we are submitting the plan for your approval
— and we recommend that you grant that approval at the upcoming Annual
Meeting to protect against a "creeping takeover" of Cracker Barrel by
Biglari Has a Glaring Business Conflict
If
Cracker Barrel's Board regularly considers pricing, product and menu development, promotions, advertising, growth and expansion, store locations and strategic plans. How could the CEO of a competing restaurant company participate in those Board discussions?
We believe that Mr. Biglari's dual role would create a clear business
conflict. In fact, to avoid this sort of conflict, our Corporate
Governance Guidelines have for years made clear that it would be
inappropriate for an employee or director of a competing restaurant
company to be nominated to or serve on our Board. We also believe that
having
Biglari's Undisclosed Agenda and Poor Governance
Judging from Mr. Biglari's track record, we believe Cracker Barrel shareholders have every reason to be wary. He has a record of returning little cash to shareholders, while cutting back significantly on reinvestment. And at Biglari Holdings, shareholders have objected to several self-interested transactions:
-
Excessive compensation. He tried to get
shareholder approval for an uncapped compensation scheme for himself,
a deal similar to the profit-sharing often used at hedge funds, though
he runs a publicly traded company.
Richard Gibbons fromThe Motley Fool called it, "One of the sweetest compensation arrangements I've ever seen at a public company — one that would deeply cut into shareholder returns."1Mr. Biglari only scaled back the plan after his shareholders complained loudly. - Disenfranchising capital structure. He is seeking shareholder approval of a two-class capital structure so he can make acquisitions that don't dilute his voting control — a plan that his own shareholders have refused to go along with.
- Reverse stock splits to freeze out small shareholders. He engineered a 1-for-20 reverse stock split, and announced plans for a further 1-for-15 reverse stock split that would force many small investors to be cashed out from their shares. He has deferred the second reverse stock split for now, in the face of shareholder opposition.
We strongly believe that electing
We believe that if you want to know what
In contrast, your Board has delivered strong long-term results, and continues to move aggressively to continue to create shareholder value. We are confident that Cracker Barrel is on the right path — with new leadership and new initiatives — to capitalize on the power of its outstanding brand.
We urge you to vote the WHITE proxy card today to elect the Cracker Barrel nominees and protect your interests.
Sincerely, |
/s/ |
|
Chairman |
On Behalf of the Board of Directors |
About Cracker Barrel
Headquartered in
Important Additional Information
Cracker Barrel, its directors and certain of its executive officers may
be deemed to be participants in the solicitation of proxies from Cracker
Barrel shareholders in connection with the matters to be considered at
Cracker Barrel's 2011 Annual Meeting. On
CBRL-F
1 Approval to use quotations has not been sought or obtained.
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or
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