Aug 7, 2008
Sardar Biglari is CEO of Steak N Shake!
Today Steak N Shake (NYSE SNS) annouced that Sardar Biglari will serve as Chief Executive Officer:
Mr. Biglari commented, “I would like to thank Wayne for his guidance over the last several months. In reviewing Steak n Shake and beginning to implement its restructuring, the Board and I concluded that to achieve the best results, we need an executive who will be focused on restaurant operations. As a consequence, we will seek a president with significant restaurant experience to concentrate on improving restaurant operations, whereas I will assume the CEO position, leading the organization principally from a strategic, financial, and governance perspective. Concurrently, we are presently undergoing a comprehensive examination of the company and are in the process of implementing a restructuring program — closing underperforming locations, reducing G&A, shortening hours of operation in many locations, and other initiatives — all on the premise that Steak n Shake will be managed based on cash flows in order to create long-term value for shareholders. Steak n Shake is an iconic brand with greatly talented people working throughout the organization. Because of all these advantages, I am confident we will regain the chain’s prior status as a great company. Details of our plan will be disclosed within the next 60 days in a shareholder letter.”
The Steak n Shake Company Announces Change in Leadership (Yahoo)
My reaction to this change is positive but mixed. Biglari became chairman with the intention of helping influence the board into finding someone to run operations for Steak N Shake (SNS). The fact that this has not happened is a little disappointing, but I know that Biglari is working 17 hour days and he has already had a positive effect at the company (steering SNS to tax savings). I’d rather that we patiently wait for the right president to be found. We’re going to need someone good in order to excel in this kind of economic climate.
One thing I’m wondering is whether we’ll see a merger between Steak N Shake (SNS) and Western Sizzlin (WEST). It would be a little similar to what Eddie Lampert did with Kmart and Sears. The same could happen with Steak N Shake with Western Sizzlin since both are in the restaurant industry, we could see some cost savings and synergies achieved by merging. Although getting the financials to work out, especially currently, would be a major stretch.
I’m not so sure about your last comment there. The difference between these scenarios (WEST/SNS vs. KMT and Sears) is comparable sizes. WEST is a $45mm company while Steak N Shake is $200mm, 4x the same. There’s no way WEST could swallow SNS.
On the other hand an SNS purchase of WEST doesn’t strike me as particularly likely, either. Feasibly, this could happen. But, knowing how Sardar thinks, and his desire to build a Berkshire-like franchise, it seems that he wouldn’t want something like this to occur. Imagine Buffett allowing Berkshire to be taken over in the seventies.
Also, Lampert bought KMart for a strategic reason (real estate). Sardar is trying to use as little capital as possible, so that wouldn’t be a reason here.
I just can’t see a good reason why it would happen. Sardar has placed very little value on “synergy,” in fact he’s pretty much railed against it in the meetings and in his letters. A merger on those grounds wouldn’t be consistent with that philosophy.
Great post though, thanks for bringing this up. I may just link to your write up instead of doing my own!
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You’re right Jeff, the merger comment was a little left-field.
I do wonder about Sardar’s long term plan for SNS though. It’s not like he was named simply “interim” CEO (maybe that doesn’t matter?) So I wonder what his plan is in the long term to remain involved with the company in an executive capacity.
I think it’s a lot to have on one plate – The Lion Fund, WEST, and now CEO of SNS but I know that he’ll be able to handle it all quite well.
merger of equals..no premiums paid…everyone forgets this option…I am not sure if I am for it or against it. Just know it is a potential. Their performances are already linked closely with so much of WEST’s assets invested in the success of SNS.
I really doubt that a merger will occur…
Is anybody mad about the 500K SNS is paying to the Lion Fund and WEST over the proxy fight? While a small sum, it is not in the interest of SNS shareholders-proxy fights are a cost of doing business, and with WEST/The Lion Fund sitting on millions of shares in SNS (with an intrinsic value a ton more than it is trading at) there is no reason for them to take spoils of war.
As a SNS shareholder, I would not be too happy about a merger. I think SNS it MUCH more undervalued than WEST. As an SNS shareholder I’ve already got Sidhar’s capital allocation abilities working for me.
Also as an investor, I’d much rather be able to decide how much of each good company I would like to own, than be forced to buy at a certain ratio.
One final point, a merger with his other company, after just naming himself chairman AND CEO, would be some pretty shady corporate governance, and would lend credence to the old managements claims he was just a corporate raider.
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