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UPDATE: Steak n Shake investor rips bylaw

February 4, 2008
A dissident investor in The Steak n Shake Co. today blasted the company for changing its bylaws to make it more difficult for shareholders to call a special meeting.

San Antonio-based Lion Fund, whose affiliates own 8 percent of Steak n Shake, said in a filing with the Securities and Exchange Commission that it would accept the company's offer to give its representatives two board seats - but only if its board rolled back the bylaw change. The investment fund wants to call a special meeting to attempt to oust most of Steak n Shake's directors.

Steak n Shake disclosed last week that it had changed its bylaws to require 80-percent shareholder support for calling a special meeting. The previous threshold was 25 percent.

"This revision provides the board immunity, not accountability, and reveals a culture to which we cannot subscribe," Lion Fund chief Sardar Biglari said in a letter to the company today.

Officials of Lion Fund and Steak n Shake could not be reached for comment today.

Last week, at the same time Steak n Shake reported the bylaw change, the company disclosed that it sent a letter to the Lion Fund encouraging it to work with the existing board rather than to fight against it. In the letter, Steak n Shake said it would expand the board from nine to 11 members to make room for the two Lion Fund representatives.

"We believe that your acceptance of our offer will enable us to work together for the future success of the company," said the letter, which was signed by director John Ryan, a former Indiana University president.

The letter strikes a conciliatory tone, noting that "many of the steps you favor are already being implemented."

Steak n Shake has been struggling for more than two years and has posted 10 straight quarters of declining same-store sales. The company's stock was trading today for about $9 a share. Shares are down 50 percent over the past 12 months.

In a letter to Steak n Shake shareholders last month, Biglari said the existing board is a big part of the problem.

"Unfortunately, the leaders of Steak n Shake have destroyed shareholder value," his letter said. "Plainly, it is time to change the current board - our first priority - to avoid further destruction."


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