Cracker Barrel Questions Qualifications, Motives of Biglari and Cooley in
Bids for Board Seats
*In Letter to Shareholders, CEO Cochran Highlights Exceptional Performance
of Cracker Barrel’s Business and Stock Price in Last Year
*Cites Biglari’s History of ‘Creeping Takeover,’ Intemperate Rhetoric and
Poor Corporate Governance
LEBANON, Tenn. -- October 18, 2012
Cracker Barrel Old Country Store, Inc. ("Cracker Barrel" or the "Company")
(Nasdaq: CBRL) today sent a letter from Sandra B. Cochran, President and Chief
Executive Officer, to shareholders strongly urging them to reaffirm their
support for the Company and its exceptional performance over the past year by
voting for the Company’s highly qualified slate of nominees to the Board of
Directors at the Annual Meeting on November 15, 2012.
In the letter, Ms. Cochran urged shareholders to reject two self-nominated
candidates – Sardar Biglari and Phil Cooley – who the Company believes may be
attempting to gain creeping control of Cracker Barrel. She noted that Mr.
Biglari, after failing to gain a Board seat last year, has returned with Mr.
Cooley to seek two Board seats, engaging in what the Company views as
intemperate rhetoric, an unknown agenda, and a record of poor corporate
Ms. Cochran wrote: “Mr. Biglari remains inexplicably insistent in his campaign
against Cracker Barrel and our Board’s nominees – despite the addition of
seven new directors in the past 18 months, our accomplishments on key
financial and operational objectives and a 68.4% appreciation in the value of
the Company’s shares since the initiation of our strategic priorities
announced in September of last year.”^1
She concluded: “Your Board of Directors strongly believes that electing Mr.
Biglari or Mr. Cooley to our Board would be contrary to your best interests at
precisely the point when our business is showing strong performance based on a
robust business plan that we continue to successfully implement. We urge you
to support all ten of your Board’s nominees.”
Text of Letter from Ms. Cochran to Cracker Barrel Shareholders:
October 18, 2012
Dear Cracker Barrel Shareholders:
We are pleased that on November 15, 2012, you will have the opportunity to
reaffirm your support for Cracker Barrel Old Country Store and our exceptional
performance over the past year by voting for our highly qualified slate of
Board nominees at our annual meeting.
The alternative is a vote for two self-nominated individuals – Sardar Biglari
and Phil Cooley – who are pursuing not one, but two seats on our Board in what
we believe is an attempt at creeping control of Cracker Barrel. After a failed
attempt to gain a Board seat for himself last year, Sardar Biglari has
returned with what we view as intemperate rhetoric, an unknown agenda and a
record of poor corporate governance.
Mr. Biglari remains inexplicably insistent in his campaign against Cracker
Barrel and our Board’s nominees – despite the addition of seven new directors
in the past 18 months, our accomplishments on key financial and operational
objectives and a 68.4% appreciation in the value of the Company’s shares since
the initiation of our strategic priorities announced in September of last
year^1. Our track record during this time, both at the Board level as well as
with regard to ongoing execution of corporate objectives, leads us to ask the
obvious questions – what is it that Mr. Biglari really wants and why?
First, we believe that Sardar Biglari’s true intentions may be to take control
of Cracker Barrel without paying shareholders a premium.
Mr. Biglari himself has been candid that the primary objective of his
acquisition vehicle through which he owns Cracker Barrel stock, Biglari
Holdings, is about gaining control and exerting power. Consider the following:
“We, however, are control investors.” (BH Letter from the Chairman, 12/10/11)
“Biglari Holdings is a jockey stock. You are choosing the jockey; I am
choosing the horses. It would be asinine to bet on the jockey and then deny
him the saddle or whip.”
(BH Letter from the Chairman, 12/10/11)
After several meetings with management as well as the failed proxy fight last
year, Mr. Biglari continues to produce rhetoric without tangible ideas or
suggestions for what changes he believes are necessary. Moreover, he remains
unwilling to work with us constructively, having turned down our offer to
nominate two independent directors of his choosing – an offer we believe
should have satisfied him if his desire was really for “shareholder
representation.” From our perspective, however, it appears that he is not
truly interested in representation, but rather is looking for a platform to
pursue his own agenda and, potentially, to exercise creeping control resulting
in a takeover without paying you an appropriate premium.
^1 Share appreciation calculated from the closing price on September 12, 2011,
the day before the announcement of the
Company’s strategic priorities, through September 28, 2012.
At the same time, we believe Mr. Biglari’s contradictory statements and
actions create even more questions around his true objectives. In a press
release last year, Mr. Biglari made the following statements:
“Our intention was that even if we were to purchase additional stock, we would
keep ownership well under 20% . . . . [W]e have purchased stock for investment
purposes only.” (BH press release, 9/23/11)
Despite these assertions, Biglari Holdings (1) ran a proxy fight last year for
one Board seat, (2) immediately after losing the proxy fight, began
aggressively buying more Cracker Barrel stock, and (3) launched a new proxy
fight this year, seeking two Board seats this time. We believe these actions
speak louder than words, as investors who are buying for “investment purposes
only” do not wage multiple proxy contests, particularly at a time when the
target corporation is performing as well as we are. With a position that
recently reached 17.4%, Biglari Holdings is getting very close to a 20% stake
in Cracker Barrel.
With Mr. Biglari’s history of creeping control – having built Biglari Holdings
with the takeover of Steak ’n Shake without paying a premium to its
shareholders, naming himself as Chairman and CEO, and ultimately creating a
holding company named after himself – we are concerned as to what step would
be next should he get a seat or two on our Board. We urge you to consider
whether Mr. Biglari’s history suggests an undisclosed agenda here and whether
he and Phil Cooley are right for our Board.
Second, we believe Mr. Biglari’s track record of poor corporate governance
tactics speaks for itself.
While your revitalized Board of Directors at Cracker Barrel has been
overseeing a variety of ^successful initiatives to drive increasing
shareholder value, Mr. Biglari has been pursuing initiatives at Biglari
Holdings that appear to have been objectionable even to his own shareholders.
Consider the following three proposed actions that have all been deferred
and/or amended in the face of shareholder opposition:
• Excessive compensation. Mr. Biglari attempted to get shareholder approval
for an uncapped compensation scheme for himself, a deal similar to the
profit-sharing compensation plans often used at hedge funds and private equity
investment firms, even though he runs a publicly traded restaurant holding
company. Mr. Biglari scaled back the plan only after both ISS and his
shareholders expressed their disapproval.
• Disenfranchising capital structure. Mr. Biglari is once again proposing
shareholder approval of a two-class capital structure so he can make
acquisitions that don’t dilute his voting power – after canceling a planned
shareholder meeting to consider the plan last year in response to shareholder
objections. The top two leading proxy advisory firms, ISS and Glass Lewis,
have already recommended that Biglari Holdings shareholders vote against this
• Reverse stock splits to freeze out small shareholders. Mr. Biglari
engineered a 1-for-20 reverse stock split, and announced plans in 2011 for a
further 1-for-15 reverse stock split that would have forced many small
investors to be cashed out from their shares. The second reverse stock split
was tabled following shareholder opposition.
In addition, we believe that Mr. Biglari showed a disregard for federal law in
causing Biglari Holdings to acquire Cracker Barrel stock in violation of
applicable antitrust law. Biglari Holdings paid $850,000 to settle charges
brought by the Federal Trade Commission and the Department of Justice with
respect to this violation, which the chairman of the Federal Trade Commission
characterized as an abuse of the antitrust law’s “passive investment”
Finally, we believe your current Board’s track record is self-evident and you
should not risk disrupting our positive momentum.
Cracker Barrel’s recently revitalized Board of Directors, including Jim
Bradford, our incoming Board Chairman, will continue to oversee our progress
and strong execution. In prior communications, we described one element of Mr.
Bradford’s background as a “former NYSE company CEO,” suggesting that he had
served as CEO of that company while it was publicly traded rather than after
it was taken private. We sincerely regret any misunderstanding this may have
caused, but want to stress that this description does not change the enormous
value and vast experience Mr. Bradford brings to our Board. We are confident
that we can continue to execute on our strategy just as we did last year,
further creating value for you, our shareholders.
In sum, while it’s important to recognize why Mr. Biglari is WRONG for Cracker
Barrel, given our extremely successful year and our intent to leverage our
current momentum to drive results, we also want to focus on why we firmly
believe our existing slate of Board nominees is RIGHT for Cracker Barrel.
Together with our Board, Cracker Barrel management will continue to regularly
evaluate opportunities for improvement on all fronts: financially,
operationally and strategically. We have updated our business priorities to
keep the bar high and strive for better results. Our results for 2012 are
evident not only in our bottom line, but in our stock price, and we hope
you’ve benefited from these successes. We believe we have a very strong and
engaged Board in place, and the addition of Mr. Biglari or Mr. Cooley would be
detrimental to the functioning of the Board and our ongoing progress.
Your Board of Directors strongly believes that electing Mr. Biglari or Mr.
Cooley to our Board would be contrary to your best interests at precisely the
point when our business is showing strong performance based on a robust
business plan that we continue to successfully implement. We urge you to
support all ten of your Board’s nominees.
To support your Board, vote the enclosed WHITE card and vote “FOR ALL” of the
Company’s nominees to the Board. To ensure that your vote is received in time,
vote by telephone or Internet by following the instructions on the Company’s
WHITE card. We urge you NOT to sign any gold proxy card sent to you by Mr.
Biglari. Even a withhold vote for Mr. Biglari and Mr. Cooley on his gold proxy
card will cancel any previous proxy that you previously submitted to vote “FOR
ALL” the Company’s nominees as it is only the latest dated proxy card that
will be counted at the shareholder meeting.
- end -
If you have any questions or require assistance with voting your WHITE proxy
card, please call MacKenzie Partners, Inc., toll-free, at (800) 322-2885.
Sandra B. Cochran
President and Chief Executive Officer
About Cracker Barrel
Cracker Barrel Old Country Store restaurants provide a friendly
home-away-from-home in their old country stores and restaurants. Guests are
cared for like family while relaxing and enjoying real home-style food and
shopping that's surprisingly unique, genuinely fun and reminiscent of
America's country heritage…all at a fair price. The restaurant serves up
delicious, home-style country food such as meatloaf and homemade chicken n'
dumplins as well as its signature biscuits using an old family recipe. The
authentic old country retail store is fun to shop and offers unique gifts and
Headquartered in Lebanon, Tennessee, Cracker Barrel Old Country Store, Inc.
(Nasdaq: CBRL) was established in 1969 and operates 620 company-owned
locations in 42 states. Every Cracker Barrel unit is open seven days a week
with hours Sunday through Thursday, 6 a.m. — 10 p.m., and Friday and Saturday,
6 a.m. - 11 p.m. For more information, visit: crackerbarrel.com.
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 2012 Annual Meeting. On October 4, 2012, Cracker Barrel filed a
definitive proxy statement (as it may be amended, the "Proxy Statement") with
the U.S. Securities and Exchange Commission (the "SEC") in connection with any
such solicitation of proxies from Cracker Barrel shareholders. INVESTORS AND
SHAREHOLDERS ARE STRONGLY ENCOURAGED TO READ THE PROXY STATEMENT AND
ACCOMPANYING PROXY CARD AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND
IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT
INFORMATION. Detailed information regarding the identity of potential
participants, and their direct or indirect interests, by security holdings or
otherwise, is set forth in the Proxy Statement, including Annex A thereto.
Shareholders can obtain the Proxy Statement, any amendments or supplements to
the Proxy Statement and other documents filed by Cracker Barrel with the SEC
for no charge at the SEC's website at www.sec.gov. Copies will also be
available at no charge at the Investor Relations section of our corporate
website at www.crackerbarrel.com.
^1 Share appreciation calculated from the closing price on September 12, 2011,
the day before the announcement of the Company’s strategic priorities, through
September 28, 2012.
Cracker Barrel Old Country Store, Inc.
Lawrence E. Hyatt, 615-235-4432
Senior Vice President and Chief Financial Officer
Mark Harnett, 212-929-5877
MacKenzie Partners, Inc.
Julie K. Davis, 615-443-9266
Senior Director, Corporate Communications
Ruth Pachman, 212-521-4891
Kekst and Company
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