ISS and Glass Lewis Endorse All Cracker Barrel Nominees to Board; Reject Bids by Biglari and Cooley for Board Seats
- Leading Proxy Advisory Firms Cite Company's Strong Performance and Renewed Board
- ISS Says Biglari Has ‘Not Made a Compelling Case'; Glass Lewis Cites Biglari's ‘Abrasive Commentary,' ‘Specious Arguments' and ‘Vaguely-Framed Plan'
- ISS Recommends Approval of Shareholder Rights Plan
In endorsing the Cracker Barrel nominees, both ISS and Glass Lewis
recommended that shareholders reject Biglari Holdings' nomination of
- ISS stated: "As the most compelling explanation of the company's resurgence is the leadership change and execution on the new strategic plan by the existing board and management team — and not suggestions of the dissident nominees in last year's or this year's proxy contest, however meritorious — it is clear the dissidents have not made a compelling case that change at the board level is warranted."
- Similarly, Glass Lewis said: "Cracker Barrel appears to have dramatically improved its financial performance, while also taking concrete steps to remediate or eliminate several outstanding governance concerns. In response, we find the Dissident has resorted to decidedly less compelling quantitative arguments and abrasive commentary to support a vaguely-framed plan that, all other things equal, seems to work against a strategy that has objectively improved returns and transparency for Cracker Barrel shareholders."1
"It is also notable that ISS recommends shareholders vote FOR the Company's shareholder rights plan, which is designed to prevent Mr. Biglari from taking creeping control of Cracker Barrel without paying a premium to all shareholders.
"I urge our shareholders to vote FOR ALL of Cracker Barrel's Board nominees on the WHITE proxy card, and to approve the Company's important shareholder-rights plan," Ms. Cochran concluded.
Key excerpts from the ISS report:
- "For shareholders considering their vote in this proxy contest, the most telling point might be that the start of all this market endorsement coincides not only with the dissident's announcement of their first, failed proxy contest, but with the new CEO's announcement of her strategic objectives, which thus far appear to (be) delivering the goods and driving meaningful increases in shareholder value."
- "Generally when an activist loses a contest for board seats, any price support provided by the anticipation of change falls away quickly after the election itself. In this case, however, the strong improvement in share prices continued for the next eleven months, strongly suggesting the market was reacting to fundamental improvements in operations driven by the board and management team. To the extent share price appreciation has outstripped growth in margins and net income, one might reasonably conclude this is evidence the market has bought into the company's turnaround strategy and its operating leadership."
- "The income statement for fiscal 2012 strongly supports the company's view that a real turnaround has taken root."
- "So too, it might be said, is the market signaling that comes from beating analyst expectations for 4 straight quarters, or improving operating cash flow so materially that the board can comfortably double the dividend. Where the dissidents can only point to local or industry news articles crediting their influence for the turnaround, the company can point to a slew of equity analysts — who are compensated on their track record, not their column inches — who credit the strategies and execution of the board and management team."
- "A new marketing strategy, by contrast — coupled with new menu items more responsive to feedback from customer surveys — that drives a 6% increase in revenue is the kind of operating improvement that can signal an increase in economic potential to investors. Similarly, driving a 53 basis point increase in operating margin through the decidedly non-glitzy work of increasing efficiencies in logistics, employee scheduling, and organizational structure is a more powerful explanatory factor for what might have been driving the market endorsement since September 2011."
- "A vote FOR [the shareholder rights plan] proposal is warranted because the rights plan contains features that protect shareholders from entrenchment risk. Specifically, the pill has a three-year term, a 20-percent trigger, and a robust qualifying offer clause and there is no dead-hand or slow-hand provision. In addition, there are no significant governance concerns at the company."
ISS also criticized
Key excerpts from the Glass Lewis report:
-
"Recent strategic changes, including those announced by new CEO
Sandra Cochran onSeptember 13, 2011 , have led to decisively improved performance for Cracker Barrel, despite Biglari's assertions to the contrary." - "We now find a materially improved Company operating under the stewardship of a substantially reconstituted board and management team that has executed on a well-codified and publicly-disclosed business plan."
- "Further foundering Biglari's most recent solicitation are a series of relatively uncompelling and, at times, specious arguments, which collectively do little to support a forward operating plan that is decidedly light on detail, despite the Dissident's industry experience."
- "We see limited reason for shareholders to further alter the current board and prospectively hinder Cracker Barrel's recent progress."
- "Briefly setting aside the fact that Biglari fails to express a clear and cogent strategy to actually improve the Company's margins or store-level operations, our own review indicates Cracker Barrel has already enjoyed some success in translating improved financial performance into superior shareholder returns and a more attractive valuation."
- "Most notably, based on the noted period-end date, it appears the Company posted superior total shareholder returns versus the Peer Composite and both indices across each of the selected periods, a distinction we expect is owed, in no small part, to the efforts of the reconstituted board."
-
"In addition to an objectively clear inability to match Cracker
Barrel's returns across each review period, we find Biglari's
relatively modest performance over the last twelve months particularly
noteworthy, given a 17.3% stake in the Company that represented just
over half of Biglari's entire market capitalization based on closing
market prices as of
October 31, 2012 (Source: Capital IQ). In our view, this casts further doubt on the ability of the current executives and board members of the Dissident, which acts primarily as a holding company for two other restaurant chains, to contribute positively to deliberations regarding value-maximizing strategies available to Cracker Barrel." -
With respect to Mr. Biglari's commentary related to the Company's
proxy statement biography of
James W. Bradford , Glass Lewis said: "When viewed within the context of a contest that could afford Mr. Biglari significant board representation and the prospective ability to materially alter Cracker Barrel's strategic direction, we find such suggestively negative phrasing, particularly in the absence of truly compelling evidence, both unnecessarily combative and puerile. Further, we fail to see how such an approach is likely to portend constructive board-level discussions in the event Messrs. Biglari or Cooley are elected."
Cracker Barrel strongly urges shareholders to elect the Company's nominees to the Board, and to endorse the Company's shareholder-rights plan.
About Cracker Barrel
Headquartered in
Important Additional Information
Cracker Barrel, its directors and certain of its executive officers may
be deemed to be participants in the solicitation of proxies from Cracker
Barrel shareholders in connection with the matters to be considered at
Cracker Barrel's 2012 Annual Meeting. On
1 Permission to use quotes in this press release from either the ISS report or the Glass Lewis neither sought nor obtained.
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