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Food Fight: Biglari Makes Another Run at Cracker Barrel

Stocks in this article: BH CBRL

On Sunday night, it took Boston Red Sox pitcher Ryan Dempster four tries to bean controversial New York Yankee slugger Alex Rodriguez. In this case, the fourth time was the charm.

Two days earlier, Biglari Holdings (BH) CEO Sardar Biglari commenced his third bid to gain seats on country restaurant chain Cracker Barrel's (CBRL) board of directors. In this case, Biglari is hoping that the third time will be the charm. He's got an uphill fight; plunking A-Rod was much easier.

Biglari Holdings has not so quietly built a 19.9% stake in Cracker Barrel over the past couple of years. Biglari can't increase it position beyond 20% due to a poison pill adopted by Cracker Barrel. It's not clear what change Sardar Biglari, and additional Biglari Holdings nominee Phil Cooley could effect by being added to Cracker Barrel's board.

Sardar Biglari has been very vocal in his criticism of Cracker Barrel, saying the company spends too much on billboard advertising, doesn't offer its' customers good value for the money, hasn't been transparent enough in its financial disclosures, and has failed to allocate its capital well.

Cracker Barrel has offered to buy back Biglari Holding's stake, which Biglari declined.

Getting elected to Cracker Barrel's board of directors won't be easy, as Biglari has been defeated twice before.

Shareholders may be unlikely to vote for Biglari and Cooley for one simple reason; stock performance. Cracker Barrel shares -- which have risen 60% year to date and more than 160% over the past two years -- have recently breached the $100 mark, an all-time high. Perhaps they are worth much more. Biglari, who turned around fast-food chain Steak n Shake, which is owned by Biglari Holdings, has some ideas on how to extract even greater value, but that may be a difficult argument to make to satisfied shareholders. CBRL Chart CBRL data by YCharts

Biglari's abrasive nature has done little to enamor him with Cracker Barrel shareholders, either. If he somehow is elected, I'd like to be a fly on the wall at those board meetings. It would be a clash of cultures at the very least.

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