sns takeover

[ragnarisapirate]

First and foremost, I want to say that this is a strictly hypothetical situation- really, more of a black swan event, and, I am genuinely curious as to what could happen given the situation:

 

Since the last filing of SNS, where it came out that Biglari now has the ability to allocate up to 10 million in anyway that he sees fit, we have to wonder- how is he gonna do it?

 

Now, assuming that SNS will take over another company (as he essentially did with WEST, Friendy's, and SNS), I will ask the question-is this the safest thing for Biglari to do?

 

Reason that I ask is that with WEST, he essentially has an iron grip in regards to controlling the company... With SNS, he only directly controls, what? 15%? Hardly enough to ensure that he can control SNS in thick and thin (as Buffett and Lampert have done)

 

Hypothetically, what would happen if Biglari allocates capital in a company that is SUPER cheap, but due to Mr. Market, the price plummets, and the shareholders of SNS get pissed- thus, potentially kicking him out of control of the company (which, don't get me wrong, would probably make me sell my shares). This shouldn't be too far out of the realm of possibility; look at the use of SNS call options, via WEST. After all, despite the record time for a turnaround at SNS, 15% is not much voting stock- and shareholders can get pretty crazy at times.

[Parsad]

Steak'n Shake can enact a shareholder rights plan (poison pill) where they could make a takeover unattractive.  In the worst case scenario, if anyone wanted to take over the company, they would end up driving the price up considerably and shareholders could sell at a premium...including Sardar's controlling group. 

 

The big question you should ask is why would anyone would want to acquire SNS and replace Sardar?  Other than someone with a grudge aiming to get back at him (Gilman), why would anyone spend so much capital and pay a fair price, only to get rid of a manager who turned the business around and probably knows more than the acquirer.

 

So, that answer leads to the question, but what if Sardar screws up?  Well, that's actually a bigger reason why shareholders should be happy, because Sardar is going to want to get as many shareholders on his side as he can to build a loyal following.  In other words, he doesn't want to make too many mistakes, as he knows that the sword cuts both ways and he could end up on the same pointed edge of that sword as Gilman.

 

If you are worried about a takeover, or Sardar ever leaving Steak'n Shake, then you should probably invest in WEST rather than SNS.  Sardar, Jonathan Dash and Shawn Sedaghat effectively have full control of WEST, with Sardar controlling about 34% of WEST alone, and about 80% of WEST is really SNS.  Cheers!     

[link01]

Steak'n Shake can enact a shareholder rights plan (poison pill) where they could make a takeover unattractive. 

 

yes, but doing so would weaken his own position in the future should he engage in further proxie battles with the boards of co's where he might be investing as an activist & agitating for changes, especially removal of inept, entrenched mngt.

 

i've been more concerned about fund redemptions than a takeover attempt. sardar & dash both control 34% and approx 10% of west beneficially thru their respective hedge funds. we dont really know what percent each has direct ownership of thru money invested in those funds tho, do we? well, i know i dont. there are a lot of reasons people have been redeeming shares of mutual & hedge funds in this economy besides just 1 year of poor performance. nervousness & a real need for cash, for instance. so, if for any number of reasons the lion fund saw large redemptions, even if their last years performance was respectable, what are the implications of having to sell some (very illiquid) west shares because its one of the largest holdings?