Shareholders at Biglari Holdings Inc. opted to keep all six members of the company’s board, beating back a challenge from a small, Minneapolis-based hedge fund, Groveland Capital.
Multiple sources confirmed that the vote went in favor of all six incumbent directors, though no official vote or vote totals were announced as of press time Thursday.
Investors apparently opted for the experience of the existing board, despite ongoing concerns about controversial deals the board approved with the company’s chairman and CEO, Sardar Biglari.
The proxy fight was the first major challenge to Biglari’s hold on the company since he won seats on the board of Steak ’n Shake in 2008, later became CEO, and then turned the company into an investment vehicle and named it after himself. The company now owns Western Sizzlin, as well as the men’s magazine Maxim and a small trucking insurance company.
Shareholders give Biglari considerable credit for lifting the struggling Steak ’n Shake chain in 2008, which has since reported a string of same-store sales increases. They also give him credit for a strong investment track record, notably the 2011 purchase of a massive position in the family-dining chain Cracker Barrel.
Groveland Capital and its CEO, Nick Swenson, also could not overcome concerns about the experience of the company’s six nominees or the group’s relatively low position in the company. Groveland owns 0.17 percent of Biglari Holdings stock.
Groveland failed to secure a crucial endorsement from the proxy advisory firm, Institutional Shareholder Services, whose recommendations can often swing a contest won way or the other. ISS would not recommend that shareholders vote for any of Groveland’s nominees.
But ISS also recommended that shareholders withhold votes from Biglari Holdings’ nominees in a message to the company about its corporate governance practices. Groveland and other shareholders had argued against a licensing deal that would pay Biglari 2.5 percent of Steak ’n Shake sales for at least five years in a change of control. That incentive fee would pay Biglari an estimated $20 million a year.
Also, Biglari’s hedge fund received a $34.4 million incentive fee payment last year thanks to the performance of Cracker Barrel’s stock.
“In highlighting the repeated failures of governance by the incumbent board, the dissidents have outlined a compelling case … that change is warranted,” ISS wrote in its report. “But because the dissident slate appears vastly underprepared for the challenges of governing and running this company should they win the total control they seek … we cannot recommend that shareholders support the dissident slate.”
Another proxy advisory firm, Glass, Lewis & Co., recommended that shareholders vote for two of Groveland’s nominees. But the recommendation wasn’t enough to give Groveland any seats on Biglari Holdings’ board.
Contact Jonathan Maze at [email protected].
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