BH - Biglari Holdings

[giofranchi]

the corporate aircraft (including a G650 which is the hottest corporate jet you can get)

 

Well, I know Mr. Biglari Sardar  ;D is trying to expand the franchise abroad. For this reason the ownership of a jet might be a sound investment… We will see! My hope is he doesn’t use the jet for personal reasons… That would truly be an unjustified waste of shareholders’ money! (As if I didn’t know lots of CEOs who use the corporate jet for personal reasons… ::) )

 

In Malone's case, investors were presented a choice.  Unfortunately for them, they were defaulted into the bad choice and nudged in that direction.  But... at least they had a choice.  With Biglari, shareholders aren't getting a say in these special deals

 

I don't think this is true: shareholders always have options. They simply can cash in, selling the rights they receive and using the proceeds elsewhere.

 

Gio

[Parsad]

the corporate aircraft (including a G650 which is the hottest corporate jet you can get)

 

Well, I know Mr. Biglari Sardar  ;D is trying to expand the franchise abroad. For this reason the ownership of a jet might be a sound investment…

 

Much better!  Cheers!

[tombgrt]

the corporate aircraft (including a G650 which is the hottest corporate jet you can get)

 

Well, I know Mr. Biglari Sardar  ;D is trying to expand the franchise abroad. For this reason the ownership of a jet might be a sound investment…

 

Oh yes, a $65M jet is a great way to spend money to expand a business with a $700M market cap...

[writser]

Does he actually own a G650? I don't see that in the FAA registry - looks like he 'only' timeshares three older Gulfstream models and a Cessna.

 

Maybe he's planning to buy one, that would explain the rights offering ;) .

[giofranchi]

Oh yes, a $65M jet is a great way to spend money to expand a business with a $700M market cap...

 

Well, you are right… It doesn’t certainly seem to be a sound investment. ;)

Once again, I try not to judge every single investment decision… Some will be good, others will be poor… Overall I think results will be satisfactory.

 

Instead, as I have already said, I would be quite disappointed if that corporate jet were used for personal reasons.

 

Gio

 

[rkbabang]

3. Lying… I guess because in the beginning he said he would not be paid for his services… right? Is that what you mean? Well, those shareholders he “lied” to went on to make a lot of money! Then they could have cashed in anytime they wanted and said goodbye!

 

That is exactly what I did.  I'll give Sadar credit for what he did right. I made a lot of money on my Western Sizzlin, Friendlies, and especially SNS shares.  But when I realized that I couldn't trust what he said I cashed out and left.  Unlike, say Buffet where people stand in line to sell their companies to him, Biglari has molded a reputation for himself in such a way that any company he targets will fight him tooth and nail.  He will have a hard time getting himself on any more boards or making any new whole-company acquisitions.  It's a shame, he had so much potential.

 

[giofranchi]

Unlike, say Buffet where people stand in line to sell their companies to him, Biglari has molded a reputation for himself in such a way that any company he targets will fight him tooth and nail.  He will have a hard time getting himself on any more boards or making any new whole-company acquisitions.  It's a shame, he had so much potential.

 

You could have said the same exact thing about Carl Icahn… And don’t tell me to overlook Icahn, because he is a one of a kind wonder… He surely is! But Buffett is even more exceptional! ;)

Therefore, do you think activism works, or do you think it doesn’t? All activist investors I know of face the same problems Biglari is facing. The reason they might end up with different results is because they have different potential... And I agree with you that Biglari has much potential! :)

 

Gio

 

[cobafdek]

Biglari Holdings aircrafts...fractional and non-fractional.  Cheers!

 

http://registry.faa.gov/aircraftinquiry/Name_Results.aspx?Nametxt=BIGLARI&sort_option=5&PageNo=1

 

Any bets Mr. Biglari's Sardar's next shareholder letter will print it like _{we bought a corporate jet}?

 

If he does, Sanjeev win the debate.  If he does not, Gio wins.

[gfp]

For what it's worth, all of the aircraft on the linked FAA registry are NetJets aircraft.  All tail numbers ending with QS are NetJets.

 

Biglari Holdings aircrafts...fractional and non-fractional.  Cheers!

 

http://registry.faa.gov/aircraftinquiry/Name_Results.aspx?Nametxt=BIGLARI&sort_option=5&PageNo=1

 

Any bets Mr. Biglari's Sardar's next shareholder letter will print it like _{we bought a corporate jet}?

 

If he does, Sanjeev win the debate.  If he does not, Gio wins.

[Greg]

If Biglari Holdings has interests in 4 jets and there is only one Sardar who has been flying around in the other 3 jets?

[gg]

I am almost positive that they do not OWN the jets outright. They most likely have a Netjets membership. Practically speaking, this means that they agree to purchase a package of a certain number of flying hours on the jets. Legally, I think when you do this, Netjets actually makes you a fractional shareholder in the jets. (There are several reasons that you become a fractional shareholder in the jets, and one of them is that I believe you can benefit from the rapid depreciation schedule of the planes.)

 

Do I wish that there was not any expense from BH spent on private aircraft? Yes.

 

If they didn't have a Netjets membership, would they be one of the only $700 million market cap companies without it? Probably

 

Bottom line - some of you are misreading the FAA data as if they've spent 65 million on a jet, which is simply not true.

[topofeaturellc]

If you click on the N-Number you can see that the planes are all controlled by NetJets. You can also see who else holds interests so you can sort of guess how big a share they own in the plane.

 

Not to defend this guy or anything.  I've just been through this exercise with others.

[rkbabang]

Unlike, say Buffet where people stand in line to sell their companies to him, Biglari has molded a reputation for himself in such a way that any company he targets will fight him tooth and nail.  He will have a hard time getting himself on any more boards or making any new whole-company acquisitions.  It's a shame, he had so much potential.

 

You could have said the same exact thing about Carl Icahn… And don’t tell me to overlook Icahn, because he is a one of a kind wonder… He surely is! But Buffett is even more exceptional! ;)

Therefore, do you think activism works, or do you think it doesn’t? All activist investors I know of face the same problems Biglari is facing. The reason they might end up with different results is because they have different potential... And I agree with you that Biglari has much potential! :)

 

I have nothing against activist investors, this was something I initially liked about Biglari.  But when he is perceived as dishonest and greedy, the target companies (both management and shareholders) will fight him at any cost.  If he were perceived as honest and shareholder friendly he might more easily gain the support of the target company's shareholders, which would make acquiring companies infinitely easier.  If he had the reputation he has now he never would have been able to take over SNS.  He won't be able to pull off something like that again.  Regardless of how bad a company's management is, the shareholders are not going to want to trade it for a liar.

 

 

[ItsAValueTrap]

For what it's worth, all of the aircraft on the linked FAA registry are NetJets aircraft.  All tail numbers ending with QS are NetJets.

 

Biglari Holdings aircrafts...fractional and non-fractional.  Cheers!

 

http://registry.faa.gov/aircraftinquiry/Name_Results.aspx?Nametxt=BIGLARI&sort_option=5&PageNo=1

 

Any bets Mr. Biglari's Sardar's next shareholder letter will print it like _{we bought a corporate jet}?

 

If he does, Sanjeev win the debate.  If he does not, Gio wins.

 

My mistake, they do not have a G650.  And thank you for pointing out that they are all Netjets fractional ownerships.

[rayfinkle]

Finally--and oh man did this go longer than I had intended--being an asshole and elbowing out certain shareholders seems to have gotten other managers rich. John Malone is one example (and no, I'm not intending to compare the two). Cable Cowboy covers story after story about how Malone wrestled control through opaque corporate structuring maneuvers that strategically siphoned the best assets into subsidiaries that he had a higher probability of understanding/controlling than the predecessor structures. Here's the quote (emphasis added).

 

In Malone's case, investors were presented a choice.  Unfortunately for them, they were defaulted into the bad choice and nudged in that direction.  But... at least they had a choice.  With Biglari, shareholders aren't getting a say in these special deals, the corporate aircraft (including a G650 which is the hottest corporate jet you can get), etc. etc.

 

Sometimes things don't end so well with that type of management.  They might go on to do something really screwed up.  If you own a basket of these things, perhaps shareholder return will be mediocre once you factor in all of the blow ups.

 

Can you elaborate here on Malone? Don't BH shareholders have a choice to (subscribe or dilute)?

[dcollon]

Unlike, say Buffet where people stand in line to sell their companies to him, Biglari has molded a reputation for himself in such a way that any company he targets will fight him tooth and nail.  He will have a hard time getting himself on any more boards or making any new whole-company acquisitions.  It's a shame, he had so much potential.

 

You could have said the same exact thing about Carl Icahn… And don’t tell me to overlook Icahn, because he is a one of a kind wonder… He surely is! But Buffett is even more exceptional! ;)

Therefore, do you think activism works, or do you think it doesn’t? All activist investors I know of face the same problems Biglari is facing. The reason they might end up with different results is because they have different potential... And I agree with you that Biglari has much potential! :)

 

I have nothing against activist investors, this was something I initially liked about Biglari.  But when he is perceived as dishonest and greedy, the target companies (both management and shareholders) will fight him at any cost.  If he were perceived as honest and shareholder friendly he might more easily gain the support of the target company's shareholders, which would make acquiring companies infinitely easier.  If he had the reputation he has now he never would have been able to take over SNS.  He won't be able to pull off something like that again.  Regardless of how bad a company's management is, the shareholders are not going to want to trade it for a liar.

 

 

 

It might be interesting to ask the management at First Guard Insurance why they were willing to sell their company to Biglari Holdings earlier this year.  It might provide another view point on Sardar's ability to do deals in the future. 

[Greg]

SARDAR BIGLARI ISSUES LETTER TO SHAREHOLDERS OF

 

THE STEAK N SHAKE COMPANY

 

SAN ANTONIO, TX – February 21, 2008 – Sardar Biglari, Chairman and Chief Executive Officer of Western Sizzlin Corporation (OTC Bulletin Board: WSZL) and The Lion Fund, LP, issued the following letter today to the shareholders of The Steak n Shake Company (NYSE: SNS):

 

Dear Fellow Shareholders:

 

(Below is heavily excerpted. The complete text is at http://www.sec.gov/Archives/edgar/containers/fix071/93859/000092189508000589/dfan14a06824004_02212008.htm).

 

...we will remain a significant minority shareholder working for the benefit of all shareholders. ...Most importantly, we would not obtain a return on investment different from that of any other shareholder. We seek to make money with you, not off you.

 

[RichardGibbons]

Respectfully, I believe you and others will do nothing but find excuse after excuse for Sardar's behavior.  I don't even bother with these debates anymore, because there will always be a subset of people who say I harbor past grudges, just as there will always be people who will justify any conduct if it makes them a buck!

 

Yeah, this is right, Sanjeev.  My main concern is that for a while, this board was getting so pro-Biglari than people might  think that it was a reasonable investment akin to Fairfax and Berkshire, rather than something with a lot of hair.

 

Gio, my interpretation of you right now is that you're really emotional about the topic, and  resolve cognitive dissonance, you've decided to adopt the position that you can't judge the integrity of the people by their actions.  I think this is very likely to be harmful to you.  So, I think I'll leave this discussion alone for a while.

 

Good luck, I hope you make a bundle!

 

[Parsad]

SARDAR BIGLARI ISSUES LETTER TO SHAREHOLDERS OF

 

THE STEAK N SHAKE COMPANY

 

SAN ANTONIO, TX – February 21, 2008 – Sardar Biglari, Chairman and Chief Executive Officer of Western Sizzlin Corporation (OTC Bulletin Board: WSZL) and The Lion Fund, LP, issued the following letter today to the shareholders of The Steak n Shake Company (NYSE: SNS):

 

Dear Fellow Shareholders:

 

(Below is heavily excerpted. The complete text is at http://www.sec.gov/Archives/edgar/containers/fix071/93859/000092189508000589/dfan14a06824004_02212008.htm).

 

...we will remain a significant minority shareholder working for the benefit of all shareholders. ...Most importantly, we would not obtain a return on investment different from that of any other shareholder. We seek to make money with you, not off you.

 

The full paragraph is much clearer in hindsight on how disingenuous the intentions were:

 

In addition, the board’s letter reiterates the falsity that we are seeking to control the company for our own personal benefit and therefore should pay a control premium. Nothing could be further from the truth. This is another erroneous argument designed, in my view, to distract you from the serious problems confronting Steak n Shake. The truth is that Steak n Shake will stay in the hands of its shareholders, and we will remain a significant minority shareholder working for the benefit of all shareholders.

 

Compensation change...name change...name licensing termination fee...dual voting share structure...Lion Fund holding SNS shares...Lion Fund sold back to Biglari because compensation agreement doesn't pass...Lion Fund invests BH shares to reap hedge fund fees...control BH with less than 4% personal ownership.  Finally, Steak'n Shake by Biglari!  i didn't even know he invented steakburgers!  Cheers!

[giofranchi]

Gio, my interpretation of you right now is that you're really emotional about the topic, and  resolve cognitive dissonance, you've decided to adopt the position that you can't judge the integrity of the people by their actions.  I think this is very likely to be harmful to you.  So, I think I'll leave this discussion alone for a while.

 

Richard,

I think this is not exactly right: I cannot judge Biglari’s integrity based on the fact he changed the Stake ‘N Shake name into Biglari Holdings, based on the compensation plan he devised for himself, and based on the mistake he made of promising to work for free… Call me “emotional”, if that makes you feel good, but I am pretty sure you cannot judge Biglari’s integrity based on those facts as well. Because no one can!

Yet, those are the same things I keep hearing again and again… Nothing else!

 

I will take the evidence as it comes: when Biglari’s “unethical behavior” starts causing him to make serious business mistakes, BH’s BVPS will inevitably stop growing at the fast rate it has grown for the last 3 years. That will definitely make me revaluate my thesis about BH.

With all due respect, that evidence will be much more convincing than your arguments, Parsad’s, or those of any other detractor on the board.

 

Gio

 

[giofranchi]

It might be interesting to ask the management at First Guard Insurance why they were willing to sell their company to Biglari Holdings earlier this year.  It might provide another view point on Sardar's ability to do deals in the future.

 

+1 ;)

 

Gio

[ragu]

[...]based on the mistake he made of promising to work for free…  [...]

 

Folks keep using this as an example of Sardar "lying". However, it's the first time I've seen you say this, Gio.

 

It is inaccurate, even if it won't stop people from using it as a stick to beat Sardar with.

 

Do you (or any of those that accuse Sardar of lying) actually know the context of Sardar's statement?

 

Best,

Ragu

[rkbabang]

[...]based on the mistake he made of promising to work for free…  [...]

 

Folks keep using this as an example of Sardar "lying". However, it's the first time I've seen you say this, Gio.

 

It is inaccurate, even if it won't stop people from using it as a stick to beat Sardar with.

 

Do you (or any of those that accuse Sardar of lying) actually know the context of Sardar's statement?

 

Best,

Ragu

 

Yes I remember it well it was in response to this letter:

 

http://www.sec.gov/Archives/edgar/data/93859/000009385908000016/exhibit99_1.htm

 

"You are threatening to replace a majority of the Board with as yet unidentified candidates of your own choosing by calling a special meeting immediately after the annual meeting.  The Board’s ability to hire a permanent Chief Executive Officer and take other steps necessary for the Company’s future will be suspended and associate morale will be impaired as uncertainty continues over the composition of the Board.  Moreover, any minority shareholder who could change the Board’s composition would effectively obtain control of the Company without the payment of any control premium to shareholders."

 

Instead of saying (a complete lie) "Nothing could be further from the truth. This is another erroneous argument designed, in my view, to distract you from the serious problems confronting Steak n Shake. The truth is that Steak n Shake will stay in the hands of its shareholders, and we will remain a significant minority shareholder working for the benefit of all shareholders."

 

He could have been honest and said something such as:  Yes I intend to gain control of the company, change its name and charge the company for using it, implement a compensation scheme which benefits me at the great expense of its shareholders which will eventually enable me to use the outrageous amounts of money the company pays me to buy the company out from under its shareholders, but despite all I plan to do I still think they will be better off with me in control than its current management. 

 

He didn't say those things though, instead he lied.

 

[ragu]

 

[snipped in its entirety]

 

All fine and dandy, but what does that have to do with the question posed?

 

I'll ask again: What was the context in which Sardar said that he would "refuse extra remuneration" and how have subsequent events shown him to be lying?

 

Best,

Ragu

[rkbabang]

You are being vague and cryptic here. I'm not sure what you are getting at.

 

The context was a proxy fight with SNS management. He was trying to get board seats.  The quote from Biglari above was written by him in direct response to the quote from SNS management above.  Unless you have a different definition of the word "context" than I do, I have answered your question.  "Context" you keep saying that, I don't think it means what you think it does.