In the news release, Independent Proxy Advisory Firms ISS and
Glass Lewis Agree Biglari Capital Has Made Compelling Case for
Change at Cracker Barrel, issued 12-Nov-2024 by Biglari Capital Corp. over PR
Newswire, we are advised by the company to disregard the original
first sentence and the November 11,
2024 date below it. The complete, corrected release
follows:
Independent Proxy Advisory Firms ISS and Glass Lewis Agree Biglari
Capital Has Made Compelling Case for Change at Cracker Barrel
Glass Lewis Recommends that Shareholders Vote
FOR Two of Biglari Capital's Nominees and ISS Recommends
Shareholders Vote FOR One of Biglari Capital's
Nominees
Incumbent Directors Carl Berquist and Meg
Crofton Have Overseen Observably Poor Performance and Significant
Shareholder Value Destruction
ISS and Glass Lewis Both Cite Substantial
Analyst Concern Over the Company's Costly Transformation
Plan
Biglari Capital Urges Shareholders to Vote the
GOLD Proxy Card for All Three of Its Director
Nominees.
San Antonio, TX, Nov. 12,
2024 /PRNewswire/ -- Biglari Capital Corp. today
issued the following news release.
Dear Shareholders of Cracker Barrel Old Country Store Inc.
("Cracker Barrel" or the "Company"):
Cracker Barrel is at a pivotal moment. Under the leadership of
the current Board of Directors (the "Board"), Cracker Barrel has
suffered for years from strategic missteps, capital misallocation,
and significant shareholder value destruction.
In separate reports published on November
8, 2024, Glass Lewis and Institutional Shareholder Services
("ISS"), two independent proxy advisory firms, concluded that
Biglari Capital Corp. ("Biglari Capital," "we" or "our") have
made the case for change at Cracker Barrel.
ISS did not mince words in its report, advising that,
"Shareholders that intend to vote their shares at this upcoming
meeting are not able to take a 'wait and see' approach, but instead
must reach a judgment now about whether the current state of
affairs of the company merits immediate change at the board level.
In light of the factors covered by this analysis, the dissident
has made the case for change."1
In its report, Glass Lewis recommended shareholders use our GOLD
proxy card to support Milena
Alberti-Perez and withhold their votes on Meg Crofton. Unlike ISS, Glass Lewis recognized
the benefit of having Ms. Alberti-Perez on the Board,
stating:2
"Given the specific concerns identified here,
we take the view that Ms. Alberti-Perez offers prospectively
critical financial and capital allocation expertise, and has, in
connection with her May 2023
appointment to the board of Pitney Bowes following a campaign by
Hestia Capital, contributed to significant improvements in
shareholder value (i.e. Pitney Bowes TSR +168.6% between
May 8, 2023 and November 5, 2024, versus a 42.3% total gross
return for the Russell 3000 Index over the same period). We believe
the addition of Ms. Alberti-Perez's skill set, including an
apparent ability to work constructively with other board members in
the immediate wake of a contested solicitation, would represent a
promising turn relative to the status quo."3
Also, unlike ISS, Glass Lewis wasn't fooled by Cracker Barrel's
assertions, as they unequivocally stated:
"….the Cracker Barrel board asserts that Ms.
Alberti-Perez's financial skills are inferior to those of Mr.
Berquist, a position we consider rather tenuous, given the
Company's manifest inability to translate major capital investments
into improved operational positioning and increased shareholder
value during the latter's service on the board;"
"the board highlights Ms. Crofton's director
service at Tupperware in support of her consumer products/industry
experience, but does not acknowledge that during her nearly
eight-year board tenure, Tupperware's shares lost 94.7% of their
value on a dividend adjusted basis, with the firm initiating
Chapter 11 proceedings in September
2024;"
"the board's assertion that Ms.
Alberti-Perez's financial turnaround expertise is not relevant for
a firm poised to embark on a major, high-cost and, to date,
skeptically received transformation program following years of
overt underperformance and poorly executed capital-intensive
initiatives is, in our view, questionable.
We urge all Cracker Barrel shareholders to protect their
investment in Cracker Barrel by voting the GOLD proxy card
for all three Biglari Capital nominees: Sardar Biglari, Milena
Alberti-Perez, and Michael
Goodwin.
The Current Board Has Overseen Unacceptably Poor
Performance
As ISS notes, "the company has posted negative TSR [total
shareholder return] for the three- and five-year periods ending on
the unaffected date, and since the company announced the hiring of
its current CEO on July 18, 2023….
It is not possible to describe this performance as anything but
unacceptable."
Glass Lewis similarly observes that, "Cracker Barrel's
recent historical metrics are, by any reasonable standard,
observably poor," and that, "none of the observed
current operational metrics suggest Cracker Barrel is performing
well against its chosen peer set."
Long-Serving Incumbent Directors Carl
Berquist and Meg Crofton Should Be Held Accountable for the
Failure of the Board to Address Cracker Barrel's Problems
A board that has failed for so long to effect a turnaround must
be held accountable by its shareholders. For that we look to the
two longest-serving incumbent directors, Carl Berquist and Meg
Crofton. ISS writes that, "it is clear that the two
targeted incumbents have had the longest time horizon with which to
gauge the company's previous peer-matching performance against its
subsequent stumbles, and to take appropriate action."
Glass Lewis draws attention to "the fact that the
Company's performance since the respective appointments of Mr.
Berquist and Ms. Crofton has been exceptionally substandard. In
these regards, we believe investors have cause to scrutinize the
board's determination to raise concern about theoretical trading
consequences associated with the Dissident's minority slate
campaign while functionally circumnavigating the very real and
unambiguous declines observed during these two director's
tenures."
Glass Lewis further says that "Cracker Barrel investors have
seen significant regression in operational performance and
competitive positioning over the last several years, with
concurrent deterioration in trading values and associated valuation
metrics. To date, these and other quantitative touchpoints
remain largely unaddressed by the incumbent board, beyond brief
and broad acknowledgment of 'post-pandemic challenges and
underperformance'. All other factors held equal and with reference
to the metrics noted above, we do not consider the Company's
response demonstrates suitably thorough recognition of the scale of
Cracker Barrel's decline, including during longer periods
directly overseen by the directors targeted here."
Regarding the specific qualifications of the targeted incumbent
directors, Glass Lewis says that neither director offers, "what
we would consider to be material, direct restaurant
expertise external to their service on the Cracker Barrel board,
and their respective tenures as executives of hospitality/retail
firms each ended nearly a decade ago."
We Believe the Cracker Barrel Board Needs Fresh Perspectives
and Relevant Experience Before It Wastes $700 Million of Shareholder Money on a Dubious
"Transformation Plan"
ISS and Glass Lewis share our concerns regarding the Company's
"three-year transformation plan," with ISS noting that "the
analyst community does not expect the company's plan to meet its
financial objectives." Glass Lewis also cites the
"considerable skepticism" of analysts, stating that their
estimates imply a "substantial" level of doubt and a "very limited
buy-in". The extensive list of concerns Glass Lewis raises
regarding the plan include the Company's reliance on just two test
remodels; the inability of the Board to provide "substantive
insight into the 'data-driven review' which gave rise to the
current program;" and the absence of any specific metrics detailing
the early progress of the plan.
Responding to the Company's recent statements that some material
portion of the outlay would be utilized to address "necessary
updates that fell behind due to the pandemic and supply chain
issues," Glass Lewis identifies what it calls, "an optical
conflict between the suggestion that the current board,
including the longer tenured members targeted by Biglari here,
allowed the Company to 'fall behind' on critical maintenance capex
for multiple years (notably, while
messaging to investors in 1Q22 that the Company had adequate funds
to return capital and invest in stores), but is also well
positioned to undertake a 'disciplined approach' to the current
program."
Glass Lewis concludes that "there is adequate cause to
conclude the Cracker Barrel board would, at this particularly
critical juncture, benefit from additional oversight capacity
expressly centered on capital allocation… [and] Ms.
Crofton, as the longest serving Cracker Barrel director and a
member with relatively limited finance and capital allocation
expertise, represents the most suitable incumbent director for
investors to hold accountable here."
NOW is the Time to Protect Your Investment by Voting for All
Three of Biglari Capital's Nominees on the GOLD Proxy Card
Glass Lewis writes that, "Cracker Barrel would — based on
trailing performance and execution, and clear uncertainty regarding
the touchstones and trajectory of management's high-consequence
transformation plan — benefit from an incremental reconstitution of
the board's longer-serving membership."
In its conclusion, ISS says that, "the market has
determined that the company's shares were worth less than at any
close in nearly 15 years, the company's TSR has significantly
underperformed its peer median for all customarily measured
periods, and analyst consensus is that the company's transformation
plan, which involves capital expenditures of well over half the
company's market capitalization, is not expected to achieve stated
sales or profitability goals"—thus demonstrating the urgent
need for change.
To help reverse Cracker Barrel's downward trajectory, Biglari
Capital has nominated a slate of proven leaders:
- Sardar Biglari: a turnaround
expert with a track record of creating shareholder value at Steak
'n Shake and Biglari Holdings.
- Milena Alberti-Perez: a
financial expert with a history of capital allocation and
shareholder value creation.
- Michael Goodwin: an accomplished
technology leader who brings modern insights to the
boardroom.
Glass Lewis writes specifically regarding Ms.
Alberti-Perez that she "offers prospectively critical
financial and capital allocation expertise, and has, in
connection with her May 2023
appointment to the board of Pitney Bowes following a campaign by
Hestia Capital, contributed to significant improvements in
shareholder value." Glass Lewis further notes that, "her
election would be in place of one of the Company's two longest
serving board members, neither of which we believe has a compelling
track record of preserving and enhancing value during their service
on the Cracker Barrel board."
Glass Lewis also notes Mr. Biglari's "recent
success in driving improved performance at Biglari Holdings
(including superior shareholder returns relative to Cracker Barrel
and improved profitability at Steak 'n
Shake)" and acknowledges that the balance of the
proposals he has publicly advanced for Cracker Barrel (e.g. a
possible divestiture of Maple Street Biscuit Company, a pause on
new store openings, a review of unit economics among Cracker
Barrel's existing stores and a restoration of higher dividends only
after addressing operational failings), "does not appear to be
unreasonable in the context of challenges presently faced by
the Company."
This may be the last time shareholders will have
the opportunity to protect their investment. We have had a 13-year
investment in the stock, and our prior predictions proved correct.
We firmly believe if Biglari Capital nominees are not elected to
the Board now, there is a high-risk that the current strategy would
result in an irreversible decline in Cracker Barrel's share price.
We urge you to vote FOR all three of Biglari Capital's nominees on
the GOLD proxy card.
Visit enhancecrackerbarrel.com for more
information.
If you have any questions or need
assistance in voting, please call:
Saratoga
520 8th Avenue, 14th Floor
New York, NY 10018
Stockholders Call Toll Free at: (888) 368-0379 or
(212) 257-1311
Email: info@saratogaproxy.com
1 Permission to use quotations from
the ISS report was neither sought nor obtained. Emphases added.
2 Permission to use quotations from the Glass Lewis
report was neither sought nor obtained. Emphases added.
3 Pitney Bowes Inc.'s share price closed at
$7.50 on November 5, 2024 and has risen to $7.99 as of the close of business on November 11, 2024. Bloomberg.
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SOURCE Biglari Capital Corp.