Dive Brief:
- The U.S. Department of Justice, representing the Federal Trade Commission, filed a civil suit against Biglari Holdings on Wednesday. The lawsuit alleges the Steak 'n Shake owner and Cracker Barrel investor violated the waiting period requirements for Cracker Barrel's voting stock acquisitions in March 2020. Biglari has agreed to pay the $1.4 million settlement.
- Biglari's acquisitions exceeded the Hart-Scott-Rodino Act (HSR) filing threshold and is a repeat violation, according to the FTC. In 2012, Biglari paid $850,000 to resolve another pre-merger notification violation from its 2011 stake in Cracker Barrel. Biglari has called the noncompliance a technical error.
- Biglari's acquisitions of Cracker Barrel's securities in 2020 contributed to the activist investor's ongoing pressure on the chain. In April 2020, Biglari CEO Sardar Biglari criticized Cracker Barrel's exit of its Punch Bowl Social acquisition while just months prior, he criticized the high valuation of the eatertainment concept.
Dive Insight:
Biglari's critical assessment of Cracker Barrel extends beyond the Punch Bowl Social saga. More recently, Sardar Biglari has pushed for lower executive bonuses and more dividends. He's also been denied entry on the company's board repeatedly, according to Restaurant Business, with five proxy vote losses.
Cracker Barrel has pushed back, outlining its strategy to ensure a strong return for shareholders and aggressively growing its off-premise business. The chain is also testing new virtual concepts and ghost kitchens to support that business. Following sluggish summer sales, Cracker Barrel announced a comprehensive recovery plan to navigate the labor crisis and ongoing pandemic.
The chain's Maple Street Biscuit concept, acquired in late 2019, has also generated consecutive weeks of positive same-store sales and continues to grow its footprint.
Biglari's settlement with the FTC, which must still be approved by a court, may not affect its Cracker Barrel investment or continued pressure. But repeated violation of antitrust laws rack up fines and could erode trust in the holding company.
"Biglari claimed that it was unaware of the requirement to aggregate its current holdings when making an acquisition to determine the size of the transaction, which even if true, is grossly negligent," Holly Vedova, director of the FTC Bureau of Competition, said in a statement. Vedova added that this requirement has been in place since HSR took effect in 1978.
Biglari's challenges extend beyond Cracker Barrel. The company's Steak 'n Shake brand was recently sued for accumulating over $8.5 million in unpaid fees and interest dating back to 2018. Steak 'n Shake also narrowly avoided bankruptcy after paying off $153 million in debt.
