There's rarely a dull moment in restaurant land, a sector that is not often associated with value investing, but one where I have found some unique opportunities the past several years.
The Biglari Holding-Cracker Barrel soap opera continues to smolder. Biglari Holdings has amassed nearly a 20 percent stake in Cracker Barrel, and, unhappy with the direction of the specialty restaurant chain, has attempted to obtain seats on the board of directors. Cracker Barrel rejected these overtures and the relationship between the two companies may be getting worse.
While Cracker Barrel's recently adopted poison pill limits Biglari Holdings from increasing its stake beyond 20 percent, the situation has taken an interesting turn. Last week, Cracker Barrel management fired off a letter to Biglari Holdings CEO, Sardar Biglari, offering to buy back the 4.7 million-plus shares the company currently owns, at the market price, which equates to about $310 million. Cracker Barrel said that the offer was more than fair given that such a large a stake would be sold at a discount if unwound slowly. The company also pointed out that Biglari Holdings has already seen some $70 million in unrealized gains in its stake, suggesting that it's time to lock in those gains for Biglari shareholders.