Biglari Eager To Be Seated at Cracker Barrel

NEW YORK (TheStreet) -- There's rarely a dull moment in restaurant land, a sector that is not often associated with value investing, but one where I have found some unique opportunities the past several years.

The Biglari Holding (BH)-Cracker Barrel (CBRL) soap opera continues to smolder. Biglari Holdings has amassed nearly a 20% stake in Cracker Barrel, and, unhappy with the direction of the specialty restaurant chain, has attempted to obtain seats on the board of directors. Cracker Barrel rejected these overtures and the relationship between the two companies may be getting worse.

CBRL data by YCharts

While Cracker Barrel's recently-adopted poison pill limits Biglari Holdings from increasing its stake beyond 20%, the situation has taken an interesting turn. Last week, Cracker Barrel management fired off a letter to Biglari Holdings CEO, Sardar Biglari, offering to buy back the 4.7 million-plus shares the company currently owns, at the market price, which equates to about $310 million. Cracker Barrel said that the offer was more than fair given that such a large a stake would be sold at a discount if unwound slowly. The company also pointed out that Biglari Holdings has already seen some $70 million in unrealized gains in its stake, suggesting that it's time to lock in those gains for BH shareholders.

BH data by YCharts

It took all of one day for Biglari to respond with a resounding "no," insisting that Biglari Holdings plans to remain a long-term owner of Cracker Barrel. Sardar Biglari turned the tables, suggesting that since Cracker Barrel believes it has the financial resources to repurchase such a large stake, it should consider making a tender offer for 20% of the company, or issue a one-time $300 million special dividend to shareholders. Zing!

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