Steak n Shake shares hit 52-week low

May 29, 2008

A dissident group of investors in The Steak n Shake Co. continues to add to its stake in the locally based restaurant chain even as share prices sink to new lows.

Steak n Shake stock hit a 52-week low of $6.51 per share yesterday, down from more than $15 at this time last year. The shares fell 13 cents this morning.

The most recent tumble began on May 14, after the restaurant chain reported its 11th consecutive quarter with declining same-store sales, despite promotional offers that included $2.99 for a double steakburger and fries. Same-store sales fell 6.3 percent.

The activist investors, led by Sardar Biglari and his San Antonio-based Lion Fund, bought more than 105,000 shares in May alone, adding to an 11-percent stake, SEC filings show. Biglari's group began buying shares in August 2007, paying more than double the current value for most of them. The group is pushing for tighter cost controls, improved service and a shift to more franchised locations.

After making little progress with the sitting board, Biglari and adviser Philip Cooley took the fight to shareholders. They won board seats in a March proxy vote, unseating Alan Gilman, the chairman and acting CEO of the chain, and another former CEO, James Williamson Jr.

Biglari, 30, sought to take over as chairman but encountered resistance from sitting board members. The company instead named board member Wayne Kelley as interim chairman and CEO and elevated Chief Financial Officer Jeffrey Blade to the post of interim president.

Before the Biglari group's most recent purchases of Steak n Shake shares, the group owned about 3 million shares. By comparison, Blade owns about 74,000 shares, and Kelley owns about 43,000.

In another recent insider transaction, Steak n Shake Chief Marketing Officer Steven Schiller sold about 7,000 shares on May 23, netting about $46,000.

In April, Biglari revealed that two executives with longtime ties to Steak n Shake and a top Texas restaurant executive had joined his quest to overhaul the chain. Joining Biglari: S. Sue Aramian, a former board member the company once described as a "modern-day founder" of the restaurant chain; Charles E. Arnett, a former partner in Kelley & Partners Ltd., the investment firm led by company patriarch E.W. Kelley before his 2003 death; and Tim Taft, a former top executive at Whataburger and Pizza Inn, two restaurant chains headquartered in Texas.

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