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Cracker Barrel serves second poison pill

by Demitri Diakantonis | Published April 10, 2012 at 4:18 PM

Cracker Barrel Old Country Inc. has adopted its second poison pill in just over six months, a move aimed in particular against activist shareholder Sardar Biglari, who has built up a 16% stake in the restaurant chain.

Lebanon, Tenn.-based Cracker Barrel said Tuesday, April 10, that it has adopted a poison pill that would dilute the stock should any investor or affiliated group acquire 20% or more of its shares. In September, Cracker Barrel instituted a poison pill that triggered at a 10% ownership threshold, a measure that was criticized as insufficient.

Indeed, Tuesday's action is in response to Biglari, whose firm Biglari Holdings Inc., has amassed a 16% stake in Cracker Barrel after buying $2.8 million worth of shares earlier this month.

"The board's action is in response to Biglari Holdings' continuing open-market acquisition program of Cracker Barrel shares, which has brought current ownership to over 16% and the resulting possibility that Biglari Holdings could accumulate an even more substantial and potentially controlling position in Cracker Barrel through market purchases that do not reflect a control premium offered to all shareholders," said Cracker Barrel CEO Sandra Cochran in a statement.

The plan will be put to a shareholder vote at the company's annual shareholder meeting later this year. Under the plan, once the 20% ownership threshold is met, Cracker Barrel shareholders can buy a certain amount of additional shares for $200 that will hold a market value of up to $400, based on the company's stock price during that time period, according to filings.

The rights plan does not account for all-cash, fully financed bids, that are open for at least 60 business days.

Cracker Barrel's latest poison pill will likely make it much harder and more costly for Biglari to make an outright bid for the company.

"I suspect shareholders will approve a pill forcing Biglari to put up a higher bid for the company or [its] shares if he wants it," said one industry analyst.

Biglari has been making a run at Cracker Barrel, an American-style casual-dining chain, since September, when he publicly criticized management on everything from the company's poor financial reporting to its decision to increase menu prices during the recession.

Cracker Barrel shareholders disapproved of the company's first poison pill plan last December, and turned down Biglari's board nominations. Right now, Biglari has clearance to buy up to 49.99% of Cracker Barrel shares.

"The shareholder rights plan is designed to assure that all of Cracker Barrel's shareholders receive fair and equal treatment in the event of any proposed takeover of the company and to guard against any attempt to gain control of Cracker Barrel without paying all shareholders a premium for that control," Cochran added in a statement.

If the current plan is approved, the poison pill will expire in April 2015.

Cracker Barrel shares were trading 30 cents lower, to $55.13, on Tuesday afternoon, giving it a market capitalization of around $1.3 billion.

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Tags: Biglari Holdings Inc. | Cracker Barrel Old Country Inc. | poison pill | Sandra Cochran | Sardar Biglari

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Cracker Barrel serves second poison pill

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