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Sardar Biglari drops stake in Red Robin

Two companies led by investor Sardar Biglari have sold their combined 6-percent stake in Red Robin Gourmet Burgers Inc., according to documents filed with the Securities and Exchange Commission.

Biglari is the chairman and chief executive of San Antonio-based Biglari Holdings Inc., which operates the Steak 'n Shake and Western Sizzlin chains. He also is a well-known restaurant investor who has played roles in deals at Friendly Ice Cream Corp. and during the Applebee’s-IHOP merger.

Documents filed late Friday with the SEC by Red Robin and Biglari Holdings, but not made public until Monday, said Biglari Holdings had divested 738,599 shares, or 4.7 percent, of Red Robin common stock and that The Lion Fund LP had sold another 202,590 shares, or 1.3 percent. Lion Fund is controlled by Biglari Capital Corp., a wholly owned subsidiary of Biglari Holdings.

Though the Biglari Holdings and Lion Fund investments in Red Robin had been reported as passive in nature, Sardar Biglari’s reputation as an activist investor had sparked investor interest in the casual-dining operator. On July 2, the day it was made public that the Biglari-controlled companies had acquired a 6-percent interest, Red Robin’s stock price closed 8.7-percent higher, at $19.10 a share, compared with the prior day’s close.

On Monday, the day it was disclosed that Biglari Holdings and affiliated entities had sold off all of their Red Robin Gourmet Burgers Inc. stock, the company's stock price fell about 3.1 percent to close at $17.47.

Over the past 52 weeks, Red Robin's stock has traded between $14.39 and $29.10.

The move by Biglari comes as Greenwood Village, Colo.-based Red Robin, which operates or franchises 443 casual-dining restaurants, appoints a new chief executive and recently reported that same-store sales were moving in the right direction after more than two years of declines.

Restaurant analysts in recent months have pointed to Red Robin as a possible buyout target. Such speculation was not cooled by the disclosure July 2 that Biglari Holdings and affiliated companies had acquired a major chunk of Red Robin’s common shares at a time when two companies working in tandem — Clinton Group Inc. and Spotlight Advisors LLC — had increased their collective stake in Red Robin to about 7 percent.

As a result of pressure from Clinton Group and Spotlight Advisors, Red Robin's management agreed earlier this year to a number of changes, including the appointment of a new chief executive to replace current CEO Dennis Mullen. Earlier this month, Red Robin said Steve Carley, president and chief executive of Costa Mesa, Calif.-based El Pollo Loco Inc., would take the reins as CEO on Sept. 13.

For the second quarter ended July 11, Red Robin reported net income of $4.3 million, or 28 cents per share, compared with profit of $6.4 million, or 41 cents per share, for the same quarter a year ago. Revenue remained flat at $201.3 million, and same-store sales at corporate locations dropped 1.2 percent — a sequential improvement over the 2.3-percent decrease in same-store sales reported in the first quarter of this year.

Red Robin officials said that first four weeks of the third quarter showed improvement, with same-store sales at corporate restaurants up 1.4 percent and guest counts up 4.1 percent, which the company attributed to a week of television advertising during the four-week period.

Contact Alan J. Liddle at [email protected].

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