Biglari Holdings Inc. · NYSE:BH
Biglari — Proxy Contest (March 2015)
60 slides from Biglari's proxy contest presentation, Mar 17, 2015
Slide 1: Enhancing Shareholder Value at Biglari Holdings, Inc.
Enhancing Shareholder Value at Biglari Holdings, Inc. NYSE: BH March 13, 2015 Information contained herein may be based on data obtained from recognized statistical services, issuer reports or communications, or other sources believed to be reliable. However, we have not verified such information an
Slide 2: Important Information
Groveland Capital – Unearthing New World Opportunities Important Information THE GROVELAND GROUP CONSISTS OF THE FOLLOWING PERSONS WHO ARE PARTICIPANTS IN THE SOLICITATION FROM THE COMPANY’S SHAREHOLDERS OF PROXIES IN FAVOR OF THE GROVELAND NOMINEES: GROVELAND MASTER FUND LTD. (FORMERLY KNOWN AS GRO
Slide 3: Biglari Holdings (NYSE: BH) Overview
Groveland Capital – Unearthing New World Opportunities Biglari Holdings (NYSE: BH) Overview In 2008, Sardar Biglari became Chairman and CEO of Biglari Holdings Inc. (formerly Steak n Shake). Biglari Holdings Inc. (“BH” or the “Company”) is an Indiana corporation that employs 23,130 persons. It is a
Slide 4: Executive Summary: Change Is Necessary
Groveland Capital – Unearthing New World Opportunities Executive Summary: Change Is Necessary We believe that replacing the incumbent board of directors will start a process that drives significant shareholder value. The new board will start by addressing chronic corporate governance problems and wi
Slide 5: Some History: Declining Operating Income
Groveland Capital – Unearthing New World Opportunities *Source: Groveland Group Research Some History: Declining Operating Income Since fiscal 2011, BH has lost focus. Its operating performance has steadily declined. The Company’s operating income has fallen from $52.5MM (a 7.4% margin) in fiscal 20
Slide 6: Some Tumultuous History: 2008-2014
Groveland Capital – Unearthing New World Opportunities Some Tumultuous History: 2008-2014 Feb 4: Biglari conditionally joined BH Board. Feb 14: Steak n Shake (SNS) sought shareholder support in proxy fight against Sardar Biglari and The Lion Fund, L.P. 2008 Jun 19: Biglari appointed Chairman of SNS
Slide 7: Some Tumultuous History: 2008-2014
Groveland Capital – Unearthing New World Opportunities Some Tumultuous History: 2008-2014 Apr 30: Biglari Holdings announced that it was acquiring Biglari Capital Corporation (“BCC”), Mr. Biglari’s investment company and the General Partner of the Lion Fund, L.P., for $4.2 million. The buyout was co
Slide 8: Some Tumultuous History: 2008-2014
Groveland Capital – Unearthing New World Opportunities Some Tumultuous History: 2008-2014 Jan 11: BH entered into a Trademark License Agreement with Sardar Biglari to license the "Biglari" name. May 14: Biglari Holdings, Inc. entered into a Trademark Sublicense Agreement with Steak n Shake, LLC and
Slide 9: Stock Price Has Underperformed Its Benchmark Indices and Peer Group
Groveland Capital – Unearthing New World Opportunities BH’s Stock Price Has Underperformed Its Benchmark Indices and Peer Group Over the past 1-year, 3-year and 5-year timeframe, BH’s stock has underperformed its benchmark indices by a wide margin. BH’s Relative Stock Performance BH’s Relative Stock
Slide 10: Stock Price Has Underperformed Its Benchmark Indices and Peer Group
Groveland Capital – Unearthing New World Opportunities BH’s Stock Price Has Underperformed Its Benchmark Indices and Peer Group BH ISS Peer Group 46.3% 260.8% Nov-21-2014 Oct-23-2014 Page 10
Slide 11: Operating Performance Has Deteriorated Significantly
Groveland Capital – Unearthing New World Opportunities BH’s Operating Performance Has Deteriorated Significantly The Company’s operating performance has deteriorated significantly over the past 5 years. Operating Income (In MM) Operating Income Margin FY2009 $20.9 3.3% FY2010 $50.0 7.4% FY2011 $52.5
Slide 12: Operating Performance Has Deteriorated Significantly
Groveland Capital – Unearthing New World Opportunities BH’s Operating Performance Has Deteriorated Significantly This underperformance appears to be in part a result of ballooning Consolidated Selling, General and Administrative expenses (“SG&A”). SG&A (In MM) FY2009 $70.0 FY2010 $76.4 FY2011 $86.9
Slide 13: Operating Performance Has Deteriorated Significantly
Groveland Capital – Unearthing New World Opportunities BH’s Operating Performance Has Deteriorated Significantly Steak n Steak G&A spending as criticized by Sardar Biglari in 2008. “It is appalling that the board would allow overspending to burden shareholders so dearly. Had G&A on a per unit basis
Slide 14: Operating Performance Has Deteriorated Significantly
Groveland Capital – Unearthing New World Opportunities BH’s Operating Performance Has Deteriorated Significantly In the table below, find updated data for fiscal years 2009-2014. Let’s apply the same logic that Mr. Biglari used in 2008 (see previous slide) to this data. G&A as a Percentage of Net Re
Slide 15: Operating Performance Has Deteriorated Significantly
Groveland Capital – Unearthing New World Opportunities BH’s Operating Performance Has Deteriorated Significantly A comparison of operating metrics for the past six years under Sardar Biglari versus the six years before with prior management. Period Revenue (In MM) 6-Yr CAGR Operating Income (In MM)
Slide 16: Operating Performance Has Deteriorated Significantly
Groveland Capital – Unearthing New World Opportunities BH’s Operating Performance Has Deteriorated Significantly How does SG&A spending at BH compare to its peers over time? Note: (1) Peer group of 49 companies. Includes companies reporting SG&A information for the entire 3-year period. (2) All data
Slide 17: CEO Has Received Outsized Compensation Despite Poor Performance
Groveland Capital – Unearthing New World Opportunities BH’s CEO Has Received Outsized Compensation Despite Poor Performance Mr. Sardar Biglari stated: “I have long believed that pay should be tied to performance. What we too often learn in Corporate America is Pay-for-Failure because of asymmetrical
Slide 18: CEO Has Received Outsized Compensation Despite Poor Performance
Groveland Capital – Unearthing New World Opportunities BH’s CEO Has Received Outsized Compensation Despite Poor Performance On April 30, 2010, Biglari Holdings purchased Biglari Capital Corp. (“BCC”), the General Partner of The Lion Fund, L.P. from Mr. Biglari for $4.2MM. In connection with the acqu
Slide 19: CEO Has Received Outsized Compensation Despite Poor Performance
Groveland Capital – Unearthing New World Opportunities BH’s CEO Has Received Outsized Compensation Despite Poor Performance On September 20, 2010, BH issued a revised Proxy related to the Amended and Restated Bonus and Incentive plan that was negotiated with shareholder representatives. On November
Slide 20: CEO Has Received Outsized Compensation Despite Poor Performance
Groveland Capital – Unearthing New World Opportunities BH’s CEO Has Received Outsized Compensation Despite Poor Performance Comparison of Outsized Compensation to Peers BH Cumulative Operating Income & Cumulative CEO Compensation Page 20
Slide 21: CEO Has Received Outsized Compensation Despite Poor Performance
Groveland Capital – Unearthing New World Opportunities BH’s CEO Has Received Outsized Compensation Despite Poor Performance Comparison of Outsized Compensation to Peers Comparative 6-Year Cumulative Operating Income & Cumulative CEO Compensation (Both with and without Lion Funds Incentive Payments)
Slide 22: CEO Has Received Outsized Compensation Despite Poor Performance
Groveland Capital – Unearthing New World Opportunities BH’s CEO Has Received Outsized Compensation Despite Poor Performance Comparison of Outsized Compensation to Peers (1) Peer Group of 49 companies. Two companies had less than $10.0 million of cumulative EBIT over the 5-year period and were exclud
Slide 23: Board Has Demonstrated Poor Corporate Governance Practices
Groveland Capital – Unearthing New World Opportunities BH’s Board Has Demonstrated Poor Corporate Governance Practices Page 23
Slide 24: Board Has Demonstrated Poor Corporate Governance Practices
Groveland Capital – Unearthing New World Opportunities BH’s Board Has Demonstrated Poor Corporate Governance Practices BH’s board of directors approved a transaction between the Company and its Chairman/CEO, resulting in apparent conflicts of interest (part 1 of 3). In April 2010, Mr. Biglari sold B
Slide 25: Board Has Demonstrated Poor Corporate Governance Practices
Groveland Capital – Unearthing New World Opportunities BH’s Board Has Demonstrated Poor Corporate Governance Practices BH’s board of directors approved a transaction between the Company and its Chairman/CEO, resulting in apparent conflicts of interest (part 2 of 3). BH’s board approved the sale of B
Slide 26: Board Has Demonstrated Poor Corporate Governance Practices
Groveland Capital – Unearthing New World Opportunities BH’s Board Has Demonstrated Poor Corporate Governance Practices BH’s board approved a transaction between the Company and its Chairman/CEO, resulting in apparent conflicts of interest (part 3 of 3). As a result of BH selling BCC back to Mr. Bigl
Slide 27: Financial transparency and treating shareholders as partners
Mr. Biglari has stated that financial transparency is important so that shareholders are ”treated the way they should be, like partners who are knowledgeable about their business' operations.”* We support this belief, and believe that such transparency in other matters is also vital. Shareholders ow
Slide 28: Board Has Demonstrated Poor Corporate Governance Practices
Groveland Capital – Unearthing New World Opportunities BH’s Board Has Demonstrated Poor Corporate Governance Practices BH’s board has failed to treat shareholders the way owners should be treated, like partners who are knowledgeable about their business’ operations (part 2 of 3). COUNTERPOINT #2 Whe
Slide 29: Board Has Demonstrated Poor Corporate Governance Practices
Groveland Capital – Unearthing New World Opportunities BH’s Board Has Demonstrated Poor Corporate Governance Practices The board of directors has failed to treat shareholders the way owners should be treated, like partners who are knowledgeable about their business’ operations (part 3 of 3). COUNTER
Slide 30: Board and CEO Have Become Entrenched
Groveland Capital – Unearthing New World Opportunities BH’s Board and CEO Have Become Entrenched The board unanimously approved takeover protection that is unfriendly to shareholders and potentially harmful to the Company’s financial results. Like Mr. Biglari, we believe “shareholders are the true o
Slide 31: Board and CEO Have Become Entrenched
Groveland Capital – Unearthing New World Opportunities BH’s Board and CEO Have Become Entrenched Golden Parachute In 2010, BH’s board of directors approved a “golden parachute” for the Company’s CEO, Mr. Biglari, equal to 299% of the average annual cash compensation (consisting of his base salary an
Slide 32: Board Has Demonstrated Poor Corporate Governance Practices
Groveland Capital – Unearthing New World Opportunities BH’s Board Has Demonstrated Poor Corporate Governance Practices SELLING LOW and BUYING HIGH BH sold shares in September 2014 at $250 per share and The Lion Fund, L.P. repurchased them at $399 per share four months later. Since approximately 61.6
Slide 33: The Steak n Shake Brand And Franchisee Network Are At Risk
Groveland Capital – Unearthing New World Opportunities The Steak n Shake Brand And Franchisee Network Are At Risk SERIOUS CONCERNS ABOUT THE HEALTH OF THE FRANCHISEE NETWORK ARE JUSTIFIED The Company is facing a series of lawsuits by its franchisees. In the past six years under the current managemen
Slide 34: The Steak n Shake Brand And Franchisee Network Are At Risk
Groveland Capital – Unearthing New World Opportunities The Steak n Shake Brand And Franchisee Network Are At Risk Mr. Biglari Mr. Biglari has received very low CEO approval ratings as reported by Glassdoor, Inc., a website where employees write reviews of companies and their management. When compari
Slide 35: The Steak n Shake Brand And Franchisee Network Are At Risk
Groveland Capital – Unearthing New World Opportunities The Steak n Shake Brand And Franchisee Network Are At Risk Steak n Shake & Mr. Sardar Biglari Ranking Steak n Shake & Mr. Sardar Biglari Ranking Category Ranking CEO Approval 48th of 48 Recommend to a Friend 49th of 51 Positive Business Outlook
Slide 36: The Steak n Shake Brand And Franchisee Network Are At Risk
Groveland Capital – Unearthing New World Opportunities The Steak n Shake Brand And Franchisee Network Are At Risk “Steak n Shake” is a great brand. Why now “Steak n Shake by Biglari”? On one hand, Mr. Biglari rightly points to the wonderful qualities of the Steak n Shake brand and its outstanding br
Slide 37: Change Is Needed Now More Than Ever
Groveland Capital – Unearthing New World Opportunities Change Is Needed Now More Than Ever The incumbent board of directors do not deserve to be re-elected and change is needed now more than ever. The Company’s stock price has underperformed its benchmark indices and peer group: From Nov 2009 throug
Slide 38: We Believe A New Board Can Help
Groveland Capital – Unearthing New World Opportunities We Believe A New Board Can Help Our six Nominees will work to fix the continuing issues at Biglari Holdings. Nicholas J. Swenson Principal of Groveland Capital; CEO of AIRT, Inc. Ryan P. Buckley Director of Livingstone Partners LLC James W. Stry
Slide 39: Our Nominees Can Help Create Shareholder Value
Groveland Capital – Unearthing New World Opportunities Our Nominees Can Help Create Shareholder Value OUR CORE PRINCIPLES Managing corporate resources to drive shareholder returns now and over the long-term Corporate governance that drives shareholder value A balanced and healthy culture that consid
Slide 40: Our Nominees Can Help Create Shareholder Value: 5 Main Areas of Focus
Our Nominees intend to act vigorously to improve BH upon their election to the board. The focus areas of our plan are: Groveland Capital – Unearthing New World Opportunities Our Nominees Can Help Create Shareholder Value 5 Main Areas of Focus Improve operations by reducing obvious waste and ineffici
Slide 41: Our Interim CEO: Gene Baldwin
Groveland Capital – Unearthing New World Opportunities Our Interim CEO: Gene Baldwin Gene Baldwin has more than 35 years of accounting, finance, senior management and advisory experience. He is a proven business leader with a well-established reputation for his ability to assess, develop and impleme
Slide 42: How Our Nominees Can Help Create Shareholder Value
Groveland Capital – Unearthing New World Opportunities How Our Nominees Can Help Create Shareholder Value With active oversight, the Nominees are ready, willing and able to chart a path to success and implement change at BH. Our 15 initiatives are outlined as follows: Key Initiatives 1. Eliminate co
Slide 43: How Our Nominees Can Help Create Shareholder Value
Groveland Capital – Unearthing New World Opportunities How Our Nominees Can Help Create Shareholder Value Each initiative will be led by a team to include management and a sub-group of the board. We do not intend to make strategic decisions regarding operations that are rightly the mandate of the Pe
Slide 44: Timeline of planned actions by June and July
By June 16th Finish evaluation of Maxim Finish assessment and transition plans (where required) of senior management team with executive recruiter Finish evaluation of Steak n Shake domestic and foreign operations By June 30th Finish assessments on technology, operations and franchise relationships
Slide 45: We Believe Our Nominees Would Constitute A Superior Board
Groveland Capital – Unearthing New World Opportunities We Believe Our Nominees Would Constitute A Superior Board Our nominees bring experience and expertise and would be a superior board to the incumbents. Expertise Incumbent Groveland Group Our Observations Restaurant Operations Efficient Managemen
Slide 46: We Believe Our Nominees Would Constitute A Superior Board
Groveland Capital – Unearthing New World Opportunities We Believe Our Nominees Would Constitute A Superior Board Expertise Incumbent Groveland Group Our Observations Restaurant Experience Legal Expertise Mr. Cooper has a private law practice with legal and business experience in real-estate transact
Slide 47: We Believe Our Nominees Would Constitute A Superior Board
Groveland Capital – Unearthing New World Opportunities We Believe Our Nominees Would Constitute A Superior Board Expertise Incumbent Groveland Group Our Observations Corporate Governance On the Ground Experience Ms. Person is Chancellor and Professor of Management at Indiana University and held thos
Slide 48: We Believe Our Nominees Would Constitute A Superior Board
Groveland Capital – Unearthing New World Opportunities We Believe Our Nominees Would Constitute A Superior Board Expertise Incumbent Groveland Group Our Observations Corporate Reform Mr. Johnson is CEO of Berean Group, a consulting firm. He is an energy industry executive and insider within the worl
Slide 49: Shareholders Have A Clear Choice
Groveland Capital – Unearthing New World Opportunities Shareholders Have A Clear Choice WE BELIEVE CHANGE IS NECESSARY AND PUTS SHAREHOLDERS AHEAD The Groveland Choice A new board, Interim CEO and Permanent CEO leading to improved corporate governance and operating performance that drives shareholde
Slide 50: Vote the WHITE Proxy Card
Groveland Capital – Unearthing New World Opportunities VOTE THE “WHITE” PROXY CARD Shareholders are urged to read the definitive proxy statement and WHITE proxy card because they contain important information about the Groveland Group, the Groveland Nominees, the Company and related matters. Shareho
Slide 51: The Groveland Group Nominees: Bios
Groveland Capital – Unearthing New World Opportunities The Groveland Group Nominees: Bios BH’s board of directors currently consists of six members. At the Annual Meeting, The Groveland Group will seek to elect Messrs: Nicholas J. Swenson James W. Stryker Thomas R. Lujan Stephen J. Lombardo, III Rya
Slide 52: Our Nominees: Nick Swenson
Groveland Capital – Unearthing New World Opportunities Our Nominees: Nick Swenson Since 2009, Nick Swenson has been the CEO and a Portfolio Manager of Groveland Capital LLC. Mr. Swenson has been a director of Air T, Inc. (Nasdaq: AIRT) since August 2012 and Chairman of the board since August 2013. H
Slide 53: Our Nominees: Jim Stryker
Groveland Capital – Unearthing New World Opportunities Our Nominees: Jim Stryker Jim Stryker is a finance and accounting consultant with 37 years of experience in the restaurant industry. Mr. Stryker began his restaurant career in 1977 with El Torito Restaurants, Inc., and while he was CFO from 1985
Slide 54: Our Nominees: Tom Lujan
Groveland Capital – Unearthing New World Opportunities Our Nominees: Tom Lujan Tom Lujan is currently the Principal of Lujan Legal Counsel, LLC, a firm that provides legal counsel and consultation, and served on active duty for 27 years in the United States Army, the last 19 years as a Member of the
Slide 55: Our Nominees: Steve Lombardo, III
Groveland Capital – Unearthing New World Opportunities Our Nominees: Steve Lombardo, III Steve Lombardo, III is Of Counsel at the Chicago office of the law firm of Katten Muchin Rosenman LLP where he was an associate (1999-2007) and a partner from 2007 through January 2015. He focuses his practice i
Slide 56: Our Nominees: Ryan Buckley
Groveland Capital – Unearthing New World Opportunities Our Nominees: Ryan Buckley Ryan Buckley is currently a director of Livingstone Partners LLC, an international investment bank that provides advisory services to both healthy and distressed companies with regard to merger and acquisition (M&A) an
Slide 57: Our Nominees: Seth Barkett
Groveland Capital – Unearthing New World Opportunities Our Nominees: Seth Barkett Seth Barkett joined Groveland Capital LLC, a hedge fund manager, in February 2011. His responsibilities include investment research, trading, and portfolio management. Prior to joining Groveland Capital LLC, Seth was a
Slide 58: Overview of Groveland Capital
Groveland Capital – Unearthing New World Opportunities Overview of Groveland Capital Groveland Capital is a nimble advisory focused on unearthing unique investment opportunities. Our insight and global network is complemented by our billion dollar+ fund experience and expertise. Groveland Capital is
Slide 59: Contact Information
Groveland Capital – Unearthing New World Opportunities Contact Information Groveland Capital makes investments on a global basis. Our headquarters are in Minneapolis. To contact us, please call or email. Thank you. Nick Swenson Groveland Group 3033 Excelsior Blvd., Suite 560 Minneapolis, MN 55416 Te
Slide 60: Disclaimers
Groveland Capital – Unearthing New World Opportunities Disclaimers GROVELAND DOES NOT ASSUME RESPONSIBILITY FOR INVESTMENT DECISIONS. THIS PRESENTATION DOES NOT RECOMMEND THE PURCHASE OR SALE OF ANY SECURITY. UNDER NO CIRCUMSTANCES IS THIS PRESENTATION TO BE USED OR CONSIDERED AS AN OFFER TO SELL OR