What a disappointing end to the weekend for me as the Eagles fell to Chiefs in the Super Bowl LVII. In addition, days prior, our puppy somehow got ahold of one of my mother-in-law's hearing aids, and went to town on it. The pup had not included that in this year's cap-ex budget, so I don't know how she is going to pay for it. It remains a mystery how she was able to get that hearing aid in the first place, and we will never know.
Thankfully, however, one other mystery has been solved. This one as it relates to the ever-mysterious Biglari Holdings (BH) , (BH.A) , and a previously undisclosed position. Biglari, which owns, among other things the Steak n Shake and Western Sizzlin restaurant chain, a 9% stake in Cracker Barrel (CRBL) , First Guard Insurance, Southern Oil Company, Southern Pioneer Property and Casualty Insurance, Abraxas Petroleum (AXAS) , and Maxim Inc., has always been active in the restaurant space.
At the company's annual meeting last April, CEO Sardar Biglari mentioned the purchase of $90 million worth of stock in prior months, but did not reveal the company in question. There had been some speculation that it was another restaurant stock, and with Friday's release of a form 13G, it was finally confirmed that the company in question is indeed quick-service chain Jack in the Box (JACK) . Biglari Holdings and its entities disclosed a total stake of 2.27 million shares, or about 11% of JACK's outstanding shares, worth about $177 million.
The 13G lists the stake as "passive," which is interesting, considering Biglari's past. The company has waged several failed proxy fights with Cracker Barrel, seeking change and board seats over the past 11 years. In September, Biglari and CRBL reached an agreement, which put a BH nominee on Cracker Barrel's board of directors.
Biglari has often described the company as a "museum of businesses," and with the October purchase of Abraxas Petroleum, and JACK stake, the focus of the company appears to be clearer: restaurants, insurance, and oil.
This has always been a "sum of the parts story"; stakes in CBRL and JACK alone are worth nearly $400 million. That's without all of the other businesses.
Valuing the company is not easy for many reasons. It's a complicated stricture, has dual share classes, and the CEO has all of the power. In addition, investors have avoided the stock due to both CEO control, his compensation structure, his "bull in a China shop" approach, and a weak board of directors (all in my opinion). This has led to what I've often referred to as the "Biglari Discount."
However, with a current market cap of just $530 million, this remains a very interesting situation. As a shareholder, you do have to have the patience of Job, however.
Acquisition of the Cracker Barrel board seat may also be a step in the right direction; perhaps this represents the fruits of a bit of finesse that has been lacking.
BH shares are up 24% year-to-date, and 46% over the past year, while BH-A, the shares with the voting clout are up 22% and 39% respectively. Longer-term performance has been poor, but we'll save that for another day.
