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UPDATE: CEO exit puts Steak n Shake at crossroads

August 14, 2007

The abrupt departure of Steak n Shake Co.'s CEO yesterday following eight straight quarters of declining same-store sales might stoke investor speculation that the company will be sold.

Shares of locally based Steak n Shake Co. rose slightly this morning on news of the leadership shuffle. The stock was up 11 cents, to $13.57, one of only a few stocks to rise this morning.

The company announced yesterday that Peter Dunn is out as CEO. Chairman Alan Gilman, 77, who joined Steak n Shake in 1992 as CEO, will take the helm again on an interim basis. The company made no mention of a search for a new CEO, fueling sale speculation.

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."

The company hasn't discussed a timetable or process for finding a permanent replacement for Dunn, CFO Jeff Blade told IBJ today. He would not say whether Dunn was asked to resign.

"What you can count on the company to do is remain focused on running the business, giving the consumers a great experience when they eat in the restaurant," Blade said.

Dunn spent the last five years retooling the menu and operations of the struggling hamburger chain. The company said Dunn resigned "to pursue other interests."

Dunn unleashed a barrage of initiatives to try to increase staff retention and customer loyalty. He also rolled out such menu options as side-by-side milkshakes and deluxe salads.

Shareholders have punished the company since last week, when it announced a dip in third-quarter profit and lowered guidance. Yesterday, the company's shares dropped $1.96, or 12.7 percent, to $13.46. That's more than $1 below the company's previous 52-week low.

Shares in Steak n Shake (NYSE: SNS) traded at $16.89 as recently as Aug. 7.

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