Reporter's Notebook
Biglari gets more control at Biglari Holdings

Biglari gets more control at Biglari Holdings

This post is part of the Reporter's Notebook blog.

Sardar Biglari survived a tough spring proxy fight, but he’s not taking his chances with the next one. 

Biglari’s hedge fund, The Lion Fund, on Thursday said it would buy an additional 616,312 shares of Biglari Holdings from shareholders at $420 a share. The purchase comes from a tender offer for shares at $420 — a 13.6-percent premium on the price of those shares the day before the offer was announced early last month.

The offer was originally for 575,000 shares but was “oversubscribed,” meaning more shareholders offered to sell their shares to Biglari at that price than had been planned.

The additional shares will give the chairman of Biglari Holdings control of almost half of the outstanding shares at the company that first voted him on the board seven years ago.

The purchase of those shares will give Biglari voting control over 1.022 million shares, or just more than 49 percent of Biglari Holdings’ outstanding shares. Biglari previously controlled less than 20 percent of shares.

The tender offer came one day after Biglari Holdings opted out of an Indiana law that limits a single shareholder’s voting rights at 20 percent. In other words, Biglari will be able to vote nearly 50 percent of the company’s shares.

With that many shares, the owner of Steak n’ Shake will be almost impossible to unseat in a proxy fight, and other shareholders will struggle to get seats on the board without his endorsement. It will also limit the potential influence from other shareholders without a near unanimity among non-Biglari shareholders.

The move comes a couple of months after Biglari Holdings shareholders voted for all six incumbents of the board following a proxy fight from little known Minneapolis-based hedge fund Groveland Capital. Biglari himself was the top vote getter, but received less than 50 percent of outstanding shares, and only about 30 percent of shares he didn’t control.

The tender offer from Biglari has come under intense fire from critics. A writer at Forbes blasted the offer as a “controversial power grab,” but also saved pokes for Wall Street firms, including JPMorgan Chase and Houlihan Lokey, for working on the deal.

Yet Biglari has a history of taking steps to protect his chairmanship at Biglari Holdings since he won a seat on the board at Steak ‘n Shake in 2008, was later named chairman and changed the company’s name to Biglari Holdings. That includes a controversial licensing deal that would entitle him to 2.5 percent of Steak ‘n Shake if he were ever displaced as the company’s chairman — a fee that Groveland had estimated would pay Biglari $20 million a year.

This post has been changed from its original version.

Correction, July 2, 2015: A previous version of this post misidentified Forbes.

Contact Jonathan Maze at [email protected]
Follow him on Twitter: @jonathanmaze

TAGS: Finance
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