Western Sizzlin CEO seeks major changes to Steak n Shake and its board

By Lisa Kerner

Charlotte, N.C., Jan. 23 - Steak n Shake Co. investor Sardar Biglari outlined his plans to create value in an open letter to fellow shareholders.

Biglari is the chairman and chief executive officer of Western Sizzlin Corp. and the Lion Fund, LP, according to a Western Sizzlin news release.

Philip L. Cooley, along with Biglari, are seeking seats on Steak n Shake's board of directors at the company's 2008 annual meeting.

"Our plan is to obtain two board seats at the next annual meeting and then call a special meeting to vote on replacing most of the board," Biglari's letter said.

If elected, Biglari and Cooley would focus the board and management on the generation of free cash flows and the "judicious" reinvestment of capital.

Biglari also pledged to examine the cost structure and "advocate reduction of G&A by eliminating wasteful outlays of capital."

In addition to changing the current board, Biglari's plans for the company include:

• Maximizing intrinsic value per share;

• Fiscal discipline concerning expenses;

• Leadership changes;

• A refranchising strategy; and

• Share repurchases.

According to Biglari, Steak n Shake management has spent about $566 million in capital over the past 10 years, while operating profit declined and shareholder returns were reduced. Steak n Shake's stock rose to $18.75 in 1998, and is now at $7.65, or a loss of almost 60%, the letter to shareholders said.

The investor also described the company's results under chairman and chief executive officer Alan Gilman's leadership as disappointing and disagreed with the CEO's plan to open nine new restaurants at a cost of up to $22.5 million.

"It is time to remove the checkbook from Mr. Gilman and the current leaders of the company," Biglari said.

Biglari would like to replace Gilman with "an entrepreneurial CEO who will be relentless in fighting costs, who will focus on the customer by leading employees and franchisees to espouse a common standard of quality, service, and cleanliness."

The investor wants to also replace former CEO and current lead director James Williamson.

On Dec. 27, Western Sizzlin and its affiliates reported owning 2,275,945 shares, or 8%, of the Indianapolis-based casual dining restaurant franchisor, according to a schedule 13D filing with the Securities and Exchange Commission.

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