Biglari (NYSE:BH)
Historical Stock Chart
From May 2019 to May 2024
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Believes Groveland’s attempt to take over the Company without
paying for it would harm all shareholders –
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Reminds shareholders that since Sardar Biglari became CEO, total
shareholder return has outpaced S&P 500 by 175% –
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Urges shareholders to vote the BLUE
Proxy Card today to elect all Biglari Holdings Nominees –
Biglari Holdings Inc. (NYSE:BH) (“Biglari Holdings” or the “Company”)
today released an open letter to shareholders regarding the Company’s
2015 Annual Meeting of Shareholders, to be held April 9, 2015. A small
hedge fund, Groveland Capital LLC (“Groveland”), which has disclosed a
diminutive ownership stake in the Company of approximately 0.167%, is
attempting to replace the entire Board of Directors of Biglari Holdings
with a slate of nominees that the Company believes is wholly
unqualified. Biglari Holdings is concerned that Groveland and its
nominees are motivated by self-interest, rather than the best interests
of all shareholders and have no long-term value-creating plan for the
Company’s diverse businesses.
The full text of the letter is as follows:
Dear Shareholders of Biglari Holdings Inc.:
By now, you have received yet another letter from a small firm called
Groveland Capital LLC (“Groveland”) that is hoping to take over your $1
billion Company with only a $1 million investment. Based on the
information that Groveland has been disseminating, it appears only one
of two things could be true: 1) they do not understand our business on
even a rudimentary level or 2) they are deliberately aiming to distract
our shareholders from what truly matters — maximizing value over the
long-term. Consider the following:
The Truth Is in the Numbers: Biglari’s
Long-term Performance
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By selecting discrete time periods to evaluate the performance of our
stock, Groveland completely disregards the long-term performance of
Biglari Holdings’ stock and its investments, both of which have far
outstripped our benchmark, the S&P 500 Index.
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In relying on conventional financial metrics such as operating income
and EBITDA to measure the progress of our business, Groveland betrays
its fundamental misunderstanding of our economic objective of
maximizing per-share intrinsic value over the long-term.
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Groveland fails to appreciate the underlying rationale behind the
significant yet disciplined investments we have made in our
businesses, among other things, to expand our franchise model for
Steak n Shake and turn around the Maxim brand. Willingly and sensibly
we trade near-term profits for higher long-term cash flows.
Who is Groveland?
As a firm too small to be required to disclose its assets to the SEC,
one could be forgiven for not readily knowing the answer to this
question. We are concerned that Groveland is trying to make a name for
itself at our shareholders’ expense. However, there are a number of
things we DO know about Groveland that we
feel shareholders should consider:
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Groveland is trying to take control of your Company without paying
for it. Groveland and Nick Swenson have a minuscule stake (0.167%)
in Biglari Holdings, and Groveland’s remaining five nominees own zero
shares of the Company. One nominee, Seth Barkett, who is also Mr.
Swenson’s partner at Groveland, completely sold out of Biglari
Holdings shares one month before Groveland nominated its slate to
replace the entire Board of Biglari Holdings. Ask
yourself: How can Groveland, as a 0.167% shareholder who is
attempting to take over your Company, possibly have interests that are
aligned with yours?
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Groveland’s nominees have no experience running a business anywhere
near the size or complexity of Biglari Holdings.
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Groveland’s “plan” for our business is really no plan at all. Do
not be fooled by Groveland’s broad generalizations and empty
watchwords. We have no doubt that Groveland’s “plan” would have
disastrous consequences for our businesses, employees, and
shareholders.
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Nick Swenson has broken promises to shareholders in the past. Mr.
Swenson previously ran proxy contests at nano-cap companies like Air T
and Pro-Dex on a “corporate governance reform” platform, only to
reverse course soon after taking control. Mr. Swenson may state he is
in pursuit of “corporate governance reform” when in actuality it is
clear to us he is in pursuit of “corporate control.” Biglari Holdings’
shareholders cannot afford to have Swenson’s history repeat itself.
Groveland’s False and Misleading Claims
Although we would prefer not to engage in a point-counterpoint exchange
with Mr. Swenson, we believe the record needs to be set straight on the
following:
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Groveland Claim: “[I]t seems to us
that Steak n Shake was far from insolvent back in 2008.”
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The Truth: Steak n Shake was
within 90 days of insolvency. Whereas Groveland contends that EBITDA
was positive, in reality, Steak n Shake was millions of dollars in
the red. When I became CEO in August 2008, Steak n Shake’s
customer traffic was declining year-over-year by over 10%, cash flows
were negative, and the company was out of compliance with its
debt covenants. Its lenders demanded a reduction in its debt, and
after all possible avenues had been exhausted, one lender stated in an
e-mail to management: “We have done all we can.” Under present
management, Steak n Shake has experienced one of the great brand
turnarounds in the history of the restaurant industry. In a true
testament to the enduring power of the brand which we have
resurrected, Steak n Shake announced yesterday that it will achieve its
25th consecutive quarter of
same-store sales growth.
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Groveland Claim: Groveland has
raised questions about our acquisition of Maxim and the expenses we
have incurred to revitalize this globally-recognized brand.
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The Truth: We view Maxim as an
opportunity to achieve another turnaround success story in a similar
vein as Steak n Shake. Value is not determined by one- or two-year
cash flows; otherwise, there would be very few turnarounds and
start-ups. Thus far, we have completely revamped the magazine’s entire
staff, upgraded the publication, and more than tripled Maxim’s
advertising revenue in March 2015, as compared with the same issue in
March 2014 — all in the first year under our ownership.
Groveland’s focus on the immediate impact of these efforts concerning
our earnings statement once more ignores the significant long-term
value we expect to be created under our management for the benefit of
all shareholders.
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Groveland Claim: I receive
“outsized compensation” for my dual roles as CEO of our operating
businesses and for managing our investments.
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The Truth: For serving as CEO of
Biglari Holdings, I received $900,000 in total compensation in fiscal
2014. For my role managing our investments, the fee structure for
Biglari Capital Corp. (“BCC”), of which I am Chairman, is far more
favorable than those charged by hedge funds and comparable publicly
traded companies with similar structures. Unlike most other firms, BCC
does not receive any fee based on assets under management, only a fee
premised on the performance of our investments (which are subject to
both a 6% hurdle rate and a high-water mark). Moreover, performance
has been nothing short of extraordinary. From August 2009 through
December 31, 2014, Biglari Holdings has earned $490 million in
investment gains. As a result, Biglari Holdings’ balance
sheet has grown exponentially from a standing start of $1.6 million in
cash in 2008 to over $917 million of cash and investments on December
31, 2014.
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Groveland Claim: I sold BCC to
Biglari Holdings for $4.2 million, then bought it back for only $1.7
million.
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The Truth: I sold BCC to Biglari
Holdings for a purchase price of one dollar ($1.00). The
difference between the $4.2 million erroneously and repeatedly
referenced by Groveland and that of the $1.00 actual purchase price
represents my capital account in BCC. In other words, I just received
a return of my own capital. Again, Groveland appears to be
either incapable of understanding our disclosure or incapable of
presenting the facts.
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Groveland Claim: Mr. Swenson
states that the rights offering he conducted at Pro-Dex “did not
result in oversubscription by any shareholder.”
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The Truth: Although such was not
the result, it was certainly Mr. Swenson’s intent. Mr. Swenson
and another director gave themselves the sole opportunity to
obtain 100% of the oversubscription privilege of the rights offering,
to the exclusion of all other shareholders, who had no ability to
transfer their rights or to participate in the oversubscription. The
only reason shareholders did not suffer an extreme dilution of
their interests at the hands of Mr. Swenson was apparently because Mr.
Swenson did not do his homework: he failed to realize at the outset
that the exercise of the backstop would jeopardize Pro-Dex’s ability
to use its net operating loss carryforwards. This form of a dilutive
rights offering stands in stark contrast to the rights offerings that
were carefully planned and conducted by Biglari Holdings, in which all
shareholders were treated equally.
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Groveland Claim: “Mr. Swenson’s
actions regarding Sun Country Airline are above reproach.”
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The Truth: In October 2006, Mr.
Swenson’s former firm and Tom Petters jointly announced their
acquisition of Sun Country Airlines. Their firms were co-investors and
Swenson and Petters were both board members between 2006 and 2007. Mr.
Swenson conveniently glosses over this period of time, during which he
served on the Sun Country board together with Tom Petters, who was
subsequently convicted of orchestrating the third largest Ponzi scheme
in U.S. history behind only Bernie Madoff and Allen Stanford. Mr.
Swenson may try to gloss over his business dealings with convicted
Ponzi Schemer Tom Petters, but to us at a minimum it demonstrates
extremely poor judgment.
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Groveland Claim: Groveland has a
“clear plan of action” for Biglari Holdings.
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The Truth: It
is clear to us that Groveland’s plan is really no plan at all.
Groveland’s “plan” consists of installing a recycled “interim” CEO
(who is currently serving as a consultant) with restaurant experience
and performing a “financial, operational, and strategic review of
Maxim, First Guard Insurance, and Western Sizzlin.” No question in
our minds that the momentum of all our businesses would become
derailed under Mr. Swenson’s so-called “plan.” Mr. Swenson also
neglects to mention how he would manage the Company’s significant
investments. Furthermore, overseeing this “plan” would be Groveland’s
slate of nominees, who have no experience running a multifaceted
business of the size, scale, and scope of Biglari Holdings, and none
of whom manages an equity portfolio anywhere close to the magnitude of
ours.
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Groveland Claim: Groveland’s
ownership of 0.167% of Biglari Holdings stock is a “meaningful
position.”
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The Truth: For a group attempting
to take control of your Company, we sincerely doubt this is what Mr.
Swenson had in mind when he stated in a prior proxy contest, “Without
‘skin’ in the game, we believe the Board is not motivated to create
value for shareholders.” It is evident to us that Groveland’s
interests are not aligned with yours. Mr. Swenson claims he is engaged
in “true public service.” Given his past track record, does Mr.
Swenson actually expect shareholders to believe he is trying to take
control of your Company for altruistic reasons? What, then, is Mr.
Swenson’s motivation for taking over a $1 billion company with a $1
million investment?
Ask yourself if you would trust your investment in the hands of this
Groveland group? We believe the answer is a resounding NO.
The vote at our 2015 Annual Meeting is a vote for the future of your
investment in our Company. Do not be fooled by the false, inane
propaganda Groveland is disseminating. We trust that our shareholders
will make the correct decision so that together we may continue on our
journey to achieve maximum long-term value. We urge you to review our
detailed investor presentations at http://www.okapivote.com/biglari,
which we believe contain the actual facts you need to know to make the
right decision for the future of our Company. Be sure to vote the BLUE
proxy card today to elect all six Biglari Holdings nominees to the
Board. We look forward to continuing to serve as the stewards of your
capital.
Sincerely,
/s/ Sardar Biglari
Sardar Biglari
If you have any questions, require assistance with voting your BLUE
proxy card, or need additional copies of the proxy materials, please
contact our proxy solicitor:
OKAPI PARTNERS LLC437 Madison Avenue, 28th FloorNew
York, NY 10022(212) 297-0720Shareholders Call
Toll-Free at: (877) 279-2311E-mail: info@okapipartners.com
About Biglari Holdings Inc.
Biglari Holdings Inc. is a holding company owning subsidiaries engaged
in a number of diverse business activities, including media, property
and casualty insurance, as well as restaurants. The Company’s largest
operating subsidiaries are involved in the franchising and operating of
restaurants. All major operating, investment, and capital allocation
decisions are made for the Company and its subsidiaries by Sardar
Biglari, Chairman and Chief Executive Officer.
Risks Associated with Forward-Looking Statements
This news release may include “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995 and
other federal securities laws. These statements which may concern
anticipated future results are based on current expectations and are
subject to a number of risks and uncertainties that could cause actual
results to differ markedly from those projected or discussed here.
Biglari Holdings cautions readers not to place undue reliance upon any
such forward-looking statements, for actual results may differ
materially from expectations. Biglari Holdings does not update publicly
or revise any forward-looking statements even if experience or future
changes make it clear that any projected results expressed or implied
therein will not be realized. Further information on the types of
factors that could affect Biglari Holdings and its business can be found
in the company's filings with the SEC.
Media:Sloane & CompanyElliot Sloane,
212-446-1860esloane@sloanepr.comorDan
Zacchei, 212-446-1882dzacchei@sloanepr.com