The perspective that will be adopted for the purpose of this case analysis will be that of an institutional shareholder of Cracker Barrel. The final recommendations of this report will focus on the anticipated vote to determine whether or not Sardar Biglari should be allowed to acquire a seat on the board of directors.
The aggressive board challenges by Biglari have resulted in defensive moves by the current directors. Biglari has been vocal in his attempt to leverage his 10% stake in the company and desire to join the board of directors. In reaction to this move the board of directors has appointed additional like-minded directors to help move the company forward into an anticipated period of growth.
Additionally the company moved to block Biglari from buying more stock on the open market. It adopted a shareholder rights plan or poison pill. The poison pill gives existing shareholders the right to buy more shares if anyone acquired more than 10% of the company. Unfortunately this move has the appearance of desperation with the board more concerned with preventing their largest shareholder from gaining control and not addressing his legitimate concerns.
Cracker Barrel’s financial performance has been mediocre in recent years. In the period between 2005 and 2011, their operating income has declined by 0.5% and their customer traffic had been decreasing by an average of 2.2% per year.