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Steak n Shake shares flat after announcement

August 24, 2007

Shares of Steak n Shake Co. rose only 0.2 percent, to $15.30, this morning after the struggling Indianapolis-based hamburger chain announced late yesterday that it has hired the Wall Street firm Merrill Lynch & Co. as a financial adviser to help examine "potential opportunities."

Specifically, Merrill Lynch will advise a special committee of three independent directors that was appointed recently. The committee is helping interim CEO Alan Gilman and senior management with a strategic plan that involves simplifying initiatives, focusing on field leadership and "critically reviewing the company's cost structure."

The statement said the board has not set deadlines for the special committee, but that details of the strategic plan would be shared with stockholders in the near future.

The developments follow the abrupt Aug. 13 resignation of CEO Peter Dunn after the company announced its eighth straight quarter of declining same-store sales. The company operates about 400 stores.

Two Dallas-based investment groups-HBK Investments and Lone Star Funds-disclosed in June that they had accumulated nearly 10 percent of the company and wanted to explore an acquisition or other "potential transactions to maximize shareholder value."

An investment group headquartered in San Antonio, Texas, disclosed in a regulatory filing Aug. 17 that it has amassed a 5.8-percent stake in Steak n Shake and wants two of its representatives added to the struggling company's board.

The group includes San Antonio-based Lion Fund and Western Sizzlin Corp., a steakhouse chain based in Virginia.

According to the filing, two members of the group met Aug. 13 with Steak n Shake Chairman Alan Gilman to discuss the company's operations and plans. On Aug. 16, the group followed up with a letter asking that two of its representatives be included as nominees for board election at the annual meeting later this year.

The group did not say whether it believes Steak n Shake should be put up for sale. In June, the Dallas-based group also said it wanted Steak n Shake to explore a sale or other options to boost returns for shareholders.



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