Biglari Holdings

[OracleofCarolina]

http://www.sec.gov/Archives/edgar/data/93859/000152153613000580/form8k07428_07012013.htm

 

 

[Guest wellmont]

Berkshire filed an 8k today disclosing the compensation of the CEO. it said "Yeah...Buffett still makes $100k a year."

[Parsad]

So why wasn't this enacted in the beginning, when all of this controversy first began?  Oh wait, this was the original structure, but BC was sold to BH because of perceived conflicts.  It's the same thing we would do going forward at MPIC and if we took over a company.  He could have probably avoided all of this if he had listened to his colleagues and shareholders.

 

Does BH have any votes they need to pass still?  Can't remember if they passed the last shareholder vote, or was the meeting postponed.  Cheers!

[ragnarisapirate]

So, I have to wonder, what sparked this?

[A_Hamilton]

So is the whole point of this that Biglari is upset that no one can figure out the financials due to the consolidation of his investment partnership and this makes the financials "clean" again? He'll go from having a $415 million market cap with $400 million in BV to $440.5 million in BV even though nothing has changed.

[Parsad]

So is the whole point of this that Biglari is upset that no one can figure out the financials due to the consolidation of his investment partnership and this makes the financials "clean" again? He'll go from having a $415 million market cap with $400 million in BV to $440.5 million in BV even though nothing has changed.

 

No, I don't think that is it, since the equity investments would still be market to market, and the value would show up in the change in equity.  But I do believe that this either has to do with compensation or getting shareholders onside.  Cheers!

[Guest wellmont]

even smart people who follow this closely have no idea what this is all about. Hide your wallets. :)

[OracleofCarolina]

Would this have anything to do with the rights offering?

 

Sardar mentioned at the annual meeting that the SEC was asking for changes before they would approve the rights offering. Sardar wanted the rights offering done ASAP but the SEC was delaying.

[Parsad]

Would this have anything to do with the rights offering?

 

Sardar mentioned at the annual meeting that the SEC was asking for changes before they would approve the rights offering. Sardar wanted the rights offering done ASAP but the SEC was delaying.

 

What changes were the SEC asking for?  Was it that you can't have the company you are trying to control, buy up its own shares with company capital, so that you can increase your voting control?  Cheers! 

[Gopinath]

I am still confused trying to read the whole disclosure :-(.

 

Sanjeev, can you tell me how the new compensation be calculated? Is there any change at all?

[Christopher1]

If my understanding is correct all investments (partial ownership) will be managed through the Lion Fund I & II.

Sardar bought back the General Partner ownership, so he will earn the 25% above 6% hurdle rate, with no maximum cap.

Moreover the old incentive agreement will be applicable only to the book value of the operating subsidaries (excluding the Lion Fund).

 

Full disclosure: BH is 5% of my PTF. 

[shalab]

My read is the same as Christopher1's.

 

1. Biglari will keep the money without caps for investing

2. He will keep the net income from SnS also with a cap

 

The shareholders are losers in this proposal

[giofranchi]

One of the tactics that Freund used in this negotiation was to remind Carl of his previous assurances that if a better bid than his was put on the table he wouldn’t be the spoiler.

At this point Freund asked Icahn to live up to his familiar declaration that he may be tough and he may be incredibly hard to pin down, but once he makes a deal, he is a man of his word.

“You gave me your word you wouldn’t be the spoiler, and now you are being just that,” Freund charged. “You said you are a man of your word, but you are not behaving like one. If you do this, you are only 50 percent a man of your word.” Indignant, Icahn shot back with examples in the TWA deal where he had kept his word.

Freund nodded his head. “Okay, Carl, let’s say you are 75 percent a man of your word.”

“Come on,” Icahn countered. “Give me 80 percent. I’m at least an 80 percent man of my word.”

For a man who sees all of life as an auction, putting his own honor up for bids seemed entirely appropriate.

--“King Icahn”

 

;D ;D ;D

 

giofranchi

[rkbabang]

One of the tactics that Freund used in this negotiation was to remind Carl of his previous assurances that if a better bid than his was put on the table he wouldn’t be the spoiler.

At this point Freund asked Icahn to live up to his familiar declaration that he may be tough and he may be incredibly hard to pin down, but once he makes a deal, he is a man of his word.

“You gave me your word you wouldn’t be the spoiler, and now you are being just that,” Freund charged. “You said you are a man of your word, but you are not behaving like one. If you do this, you are only 50 percent a man of your word.” Indignant, Icahn shot back with examples in the TWA deal where he had kept his word.

Freund nodded his head. “Okay, Carl, let’s say you are 75 percent a man of your word.”

“Come on,” Icahn countered. “Give me 80 percent. I’m at least an 80 percent man of my word.”

For a man who sees all of life as an auction, putting his own honor up for bids seemed entirely appropriate.

--“King Icahn”

 

+1

 

In most areas of life there are no absolutes, everything is varying shades of gray. But there are some areas where it is all or nothing.  If I give you a large glass of drinking water and you see me place a 1/4 teaspoon of raw sewerage into the water, would you find it comforting and be willing to drink it if I told you that it was 99% pure drinking water?  No, in this case 1% sewerage is as bad as 100% sewerage.  You are not going to drink it.  The other things I put in this category are freedom (there is no such thing as part time slavery or being mostly free) and integrity (you can either be trusted or you can’t). This is the reason that even though I made a lot of money investing with Biglari in the past I no longer do so.

 

[constructive]

If you found an insurer that would sell you schmuck insurance, I wonder how large premiums would be for Sardar versus Carl.

[Parsad]

I am still confused trying to read the whole disclosure :-(.

 

Sanjeev, can you tell me how the new compensation be calculated? Is there any change at all?

 

Looks to me that the only change is that the equity portfolio for BH is now a limited partner in Lion Fund(s), which will have a higher hurdle of 6% compared to other limited partners who have a hurdle of 5%.  So he will still get an incentive fee, but slightly less than if the equities were invested directly through BH, but NO CAP!  Wholly-owned investments within BH, and equity investments through the LP.  He now doesn't need shareholder approval to bypass the cap.  Cheers! 

[Parsad]

One of the tactics that Freund used in this negotiation was to remind Carl of his previous assurances that if a better bid than his was put on the table he wouldn’t be the spoiler.

At this point Freund asked Icahn to live up to his familiar declaration that he may be tough and he may be incredibly hard to pin down, but once he makes a deal, he is a man of his word.

“You gave me your word you wouldn’t be the spoiler, and now you are being just that,” Freund charged. “You said you are a man of your word, but you are not behaving like one. If you do this, you are only 50 percent a man of your word.” Indignant, Icahn shot back with examples in the TWA deal where he had kept his word.

Freund nodded his head. “Okay, Carl, let’s say you are 75 percent a man of your word.”

“Come on,” Icahn countered. “Give me 80 percent. I’m at least an 80 percent man of my word.”

For a man who sees all of life as an auction, putting his own honor up for bids seemed entirely appropriate.

--“King Icahn”

 

+1

 

In most areas of life there are no absolutes, everything is varying shades of gray. But there are some areas where it is all or nothing.  If I give you a large glass of drinking water and you see me place a 1/4 teaspoon of raw sewerage into the water, would you find it comforting and be willing to drink it if I told you that it was 99% pure drinking water?  No, in this case 1% sewerage is as bad as 100% sewerage.  You are not going to drink it.  The other things I put in this category are freedom (there is no such thing as part time slavery or being mostly free) and integrity (you can either be trusted or you can’t). This is the reason that even though I made a lot of money investing with Biglari in the past I no longer do so.

 

+1!  Cheers!

[CONeal]

I am still confused trying to read the whole disclosure :-(.

 

Sanjeev, can you tell me how the new compensation be calculated? Is there any change at all?

 

Looks to me that the only change is that the equity portfolio for BH is now a limited partner in Lion Fund(s), which will have a higher hurdle of 6% compared to other limited partners who have a hurdle of 5%.  So he will still get an incentive fee, but slightly less than if the equities were invested directly through BH, but NO CAP!  Wholly-owned investments within BH, and equity investments through the LP.  He now doesn't need shareholder approval to bypass the cap.  Cheers!

 

So all of the money that would be invested from Steak - n - Shake will be through the Lion Fund?  That's going to be one rich man.  ;D

 

 

[wescobrk]

If my understanding is correct all investments (partial ownership) will be managed through the Lion Fund I & II.

Sardar bought back the General Partner ownership, so he will earn the 25% above 6% hurdle rate, with no maximum cap.

Moreover the old incentive agreement will be applicable only to the book value of the operating subsidaries (excluding the Lion Fund).

 

Full disclosure: BH is 5% of my PTF. "

 

I haven't had a chance to read it. It seems to be a bit obscure for the average shareholder to figure iut especially since this is the third iteration.

I got the part about no cap and saw the new 13d with cracker barrel going to lion fund 2.

What happens with the change in book value of steak n shake and future subsidiary's? Does sardar still get up to 10 million for that too?

[wescobrk]

So is the whole point of this that Biglari is upset that no one can figure out the financials due to the consolidation of his investment partnership and this makes the financials "clean" again? He'll go from having a $415 million market cap with $400 million in BV to $440.5 million in BV even though nothing has changed"

 

Market cap is almost 600 million. There still are 1.43 million shares outstanding.

[Parsad]

If he spent more of his time and intellect worrying about investments and acquisitions, and less time and intellect about his compensation, I think he would be further ahead long-term at this point...he also would have a rock-solid shareholder base that would have let him run this company forever without ever holding another shareholder vote.  Instead, every few months you see another compensation filing, or some other way of entrenching himself.  Cheers!

[Saidal]

The best part of it for him....he just bought an asset manager with over $250MM in AUM for $1.7MM. I wish I had that kind of deal thrown at me all day long. A huge value and credit negative for BH. I'm curious to what Ragu has to say about this! ;)

[Parsad]

The best part of it for him....he just bought an asset manager with over $250MM in AUM for $1.7MM. I wish I had that kind of deal thrown at me all day long. A huge value and credit negative for BH. I'm curious to what Ragu has to say about this! ;)

 

The supporters will say that he sold BC to BH for $1 and then bought it back for $1.7M...how is that unfair or unethical for BH shareholders?  Tomato...tomato!  Cheers!

[CONeal]

Since SNS has a fiduciary duty to shareholders, wondering under what kind of scenario they would pull funds from the Lion Fund?  What will he do to keep the from happening?

 

  This deal looks no different the Tom Ward having his family own the property directly across Sandridge acreage from my view.

[Myth465]

Whats most interesting about this is watching "value investors" who hold stock try to justify his actions. Its quite amusing.