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Biglari agrees to antitrust fine in Cracker Barrel deal

September 26, 2012

Biglari Holdings Inc., a chain-restaurant operator that owns Indianapolis-based Steak n Shake, has agreed to pay $850,000 to settle procedural antitrust violations stemming from its purchase of shares in Cracker Barrel Old Country Store Inc.

U.S. antitrust regulators alleged Biglari violated pre-merger reporting laws in connection with its 2011 acquisition of a stake in the Lebanon, Tenn.-based restaurant and gift shop operator. Businesses run by San Antonio-based Biglari Holdings also include the Western Sizzlin restaurant chains.

Under reporting requirements for mergers, companies must notify antitrust regulators about transactions exceeding $68.2 million. The law, the Hart-Scott-Rodino Antitrust Improvements Act, contains an exemption for acquisitions made solely for investment purposes.

“Biglari improperly failed to report the transaction to U.S. antitrust authorities by claiming the purchases were a ‘passive’ investment when, in reality, Biglari intended to become actively involved in the management of Cracker Barrel,” the U.S. Federal Trade Commission said in an e-mailed statement.

The complaint for civil penalties was filed by the Justice Department because the FTC doesn’t have the authority to fine.

In a statement, San Antonio, Texas-based Biglari disputed the FTC’s claims, saying that the company filed for Hart-Scott-Rodino approval in August 2011.

“The comments made by the FTC mischaracterize Biglari Holdings’ investment intent,” according to the statement. “Biglari Holdings has made clear in all of its public filings that it has no intention of becoming actively involved in day-to-day management or in seeking control of the board of Cracker Barrel.”

Biglari Holdings had acquired almost 9 percent of Cracker Barrel’s outstanding voting shares by June 2011, according to the complaint. Biglari Holdings continued to acquire shares through June 13, exceeding the threshold for antitrust filings, which was $66 million at the time.

Cracker Barrel, which has about 620 locations, has been fighting off attempts from Biglari to gain a seat on the dining chain’s board of directors and push for management and strategy changes. Earlier this month, Cracker Barrel said that Biglari Holdings rejected its offer to appoint two independent directors.

Biglari Holdings will nominate Chairman Sardar Biglari and the company’s vice chairman, Philip L. Cooley, for Cracker Barrel’s board at the company’s annual meeting Nov. 15. If a proxy contest ensues, “our business could be adversely affected,” Cracker Barrel said today in a company filing.

‘Our Concerns’

“Our concerns about Mr. Biglari’s intentions are underscored by the finding that Biglari Holdings violated the Hart-Scott-Rodino act in connection with its acquisition of cracker barrel stock,” a Cracker Barrel spokesman said in an e- mail.

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