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UPDATE: Steak n Shake turning away from core business

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The Steak n Shake Co. is taking a dramatic turn away from its core business with a bid to purchase a Michigan insurer in a deal valued at almost $37 million.

The Indianapolis-based burger chain, now operated as a holding company with activist-investor-turned-CEO Sardar Biglari at the helm, has offered to acquire the outstanding shares of Fremont Michigan Insuracorp Inc. for $24.50 per share in cash and stock, an 11.3 percent premium to Monday's closing price.

It's the second major deal this year for Steak n Shake. The company acquired Virginia-based Western Sizzlin Corp.—another restaurant chain where Biglari is chairman and CEO—for $39 million in a deal finalized this fall.

While Wall Street applauded the latest deal, sending shares up more than 17 percent to $345 in morning trading, local investment advisers say the company is wandering away from its specialty into uncharted territory.

"It's hard to see how burgers and insurance policies go together,"  said George Farra, co-founder and principal of Woodley Farra Manion Portfolio Management. "I'm very concerned that one of the few local publicly traded companies—its focus is being diverted to build a financial services empire without much of a track record behind it."

Steak n Shake disclosed that it had purchased a roughly 10-percent stake in Fremont in October, shortly after CEO Sardar Biglari said he intended to transform Steak n Shake into a holding company to pursue purchases “either related or unrelated to its ongoing business activities.”

The company has not revealed its plans for Fremont, but observers say Biglari wants to use the firm's $60 million investment portfolio to fund more acquisitions, following in the footsteps of his investing hero, Warren Buffett.

Buffett's Berkshire Hathaway acquired its first insurer in the 1960s and now funds billions of dollars in investments through the portfolios of its insurance companies.

Biglari, a 32-year-old hedge fund manager, last week initiated a 1-for-20 reverse stock split that has elevated Steak n Shake shares above $300 apiece, the highest among listed restaurant companies. The move was another nod to Buffett; Berkshire A shares trade for about $99,000.

The moves come at the beginning of a turnaround for Steak n Shake, which this year snapped a 14-quarter streak of declining same-store sales.

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  1. These liberals are out of control. They want to drive our economy into the ground and double and triple our electric bills. Sierra Club, stay out of Indy!

  2. These activist liberal judges have gotten out of control. Thankfully we have a sensible supreme court that overturns their absurd rulings!

  3. Maybe they shouldn't be throwing money at the IRL or whatever they call it now. Probably should save that money for actual operations.

  4. For you central Indiana folks that don't know what a good pizza is, Aurelio's will take care of that. There are some good pizza places in central Indiana but nothing like this!!!

  5. I am troubled with this whole string of comments as I am not sure anyone pointed out that many of the "high paying" positions have been eliminated identified by asterisks as of fiscal year 2012. That indicates to me that the hospitals are making responsible yet difficult decisions and eliminating heavy paying positions. To make this more problematic, we have created a society of "entitlement" where individuals believe they should receive free services at no cost to them. I have yet to get a house repair done at no cost nor have I taken my car that is out of warranty for repair for free repair expecting the government to pay for it even though it is the second largest investment one makes in their life besides purchasing a home. Yet, we continue to hear verbal and aggressive abuse from the consumer who expects free services and have to reward them as a result of HCAHPS surveys which we have no influence over as it is 3rd party required by CMS. Peel the onion and get to the root of the problem...you will find that society has created the problem and our current political landscape and not the people who were fortunate to lead healthcare in the right direction before becoming distorted. As a side note, I had a friend sit in an ED in Canada for nearly two days prior to being evaluated and then finally...3 months later got a CT of the head. You pay for what you get...

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