BH letter to the board or shareholder proposal to remove the trademark deal

[shalab]

Hi Gio/Ragu and other BH shareholders,

 

I got a small position in the last couple of days, how about a share holder proposal to terminate this? I also like Biglari to give up his CEO position and he becomes a CIO.

 

Abolish this:

 

On January 11, 2013, Biglari Holdings entered into a trademark license agreement with him, stating it would pay Biglari 2.5 % of the company's gross revenues for five years under these conditions:

 

If there is a change of control at Biglari Holdings

If Biglari is terminated from the company without cause

If the CEO/chairman resigns from his employment due to an involuntary termination event

 

cheers!

shalab

 

[frugalchief]

Hi Gio/Ragu and other BH shareholders,

 

I got a small position in the last couple of days, how about a share holder proposal to terminate this? I also like Biglari to give up his CEO position and he becomes a CIO.

 

Abolish this:

 

On January 11, 2013, Biglari Holdings entered into a trademark license agreement with him, stating it would pay Biglari 2.5 % of the company's gross revenues for five years under these conditions:

 

If there is a change of control at Biglari Holdings

If Biglari is terminated from the company without cause

If the CEO/chairman resigns from his employment due to an involuntary termination event

 

cheers!

shalab

 

Hey shalab,

 

Interesting proposition.  Why would you want Biglari to give up CEO to be CIO? 

 

While I wasn't initially happy about the trademark agreement, I believe it serves his long-term value enhancing plan well.  Most investors want results today, but to maximize value can take a while.  This allows him to implement and work his plan without disruption from outsiders.  Biglari is the reason SNS has become a better brand and why BH is doing what it's doing.

 

I view it similar to the shareholder proposal to have BRK start issuing dividends.  Doing so would kill BRK's value enhancing strategy of retaining all earnings and buy operating businesses/ securities.

 

Thx for sharing!

FC

[Parsad]

Hi Gio/Ragu and other BH shareholders,

 

I got a small position in the last couple of days, how about a share holder proposal to terminate this? I also like Biglari to give up his CEO position and he becomes a CIO.

 

Abolish this:

 

On January 11, 2013, Biglari Holdings entered into a trademark license agreement with him, stating it would pay Biglari 2.5 % of the company's gross revenues for five years under these conditions:

 

If there is a change of control at Biglari Holdings

If Biglari is terminated from the company without cause

If the CEO/chairman resigns from his employment due to an involuntary termination event

 

cheers!

shalab

 

Hey shalab,

 

Interesting proposition.  Why would you want Biglari to give up CEO to be CIO? 

 

While I wasn't initially happy about the trademark agreement, I believe it serves his long-term value enhancing plan well.  Most investors want results today, but to maximize value can take a while.  This allows him to implement and work his plan without disruption from outsiders.  Biglari is the reason SNS has become a better brand and why BH is doing what it's doing.

 

I view it similar to the shareholder proposal to have BRK start issuing dividends.  Doing so would kill BRK's value enhancing strategy of retaining all earnings and buy operating businesses/ securities.

 

Thx for sharing!

FC

 

Biglari has added tremendous value as CEO...CIO would not make any sense. 

 

But don't kid yourself about why the trademark agreement was put in place.  It has nothing to do with long-term enhancing value and everything with entrenching himself.

 

The greatest investor in history, who knows everything about enhancing value, never had such an agreement...nor would one ever cross his mind.  Even Buffett cannot put his ego ahead of his humility, no matter how much it might improve the "Buffett" brand.  Cheers! 

[giofranchi]

The greatest investor in history, who knows everything about enhancing value, never had such an agreement...nor would one ever cross his mind.  Even Buffett cannot put his ego ahead of his humility, no matter how much it might improve the "Buffett" brand.  Cheers!

 

The problem imo is very simple and clear: you are going on and on comparing Biglari to Buffett, he instead seems to suggest “if you are looking for the next Berkshire, look somewhere else!”.

 

Biglari knows very well that in business each situation is different, and the right course of action each time is different.

 

Buffett never had to deal with control. Munger referred to Buffett in the early days calling him “the serial acquirer”, but evidently to buy a very large percentage of Berkshire back then was not so expensive as to buy the same percentage of BH today. There is simply no way Biglari could get control over BH buying its equity today.

 

Yet, control is crucial. Anyone who runs a business finds out pretty soon how crucial control actually is! And, as I have always said, I want him to be in charge and to feel safe. The less time he worries about his position and about someone buying a lot of BH and starting questioning his business decisions and actions, the more time he can devote to enhance value.

 

Gio

 

[adesigar]

The greatest investor in history, who knows everything about enhancing value, never had such an agreement...nor would one ever cross his mind.  Even Buffett cannot put his ego ahead of his humility, no matter how much it might improve the "Buffett" brand.  Cheers!

 

The problem imo is very simple and clear: you are going on and on comparing Biglari to Buffett, he instead seems to suggest “if you are looking for the next Berkshire, look somewhere else!”.

 

Biglari knows very well that in business each situation is different, and the right course of action each time is different.

 

Buffett never had to deal with control. Munger referred to Buffett in the early days calling him “the serial acquirer”, but evidently to buy a very large percentage of Berkshire back then was not so expensive as to buy the same percentage of BH today. There is simply no way Biglari could get control over BH buying its equity today.

 

Yet, control is crucial. Anyone who runs a business finds out pretty soon how crucial control actually is! And, as I have always said, I want him to be in charge and to feel safe. The less time he worries about his position and about someone buying a lot of BH and starting questioning his business decisions and actions, the more time he can devote to enhance value.

 

Gio

 

The problem imo is very simple and clear: you are confused on the difference between the owners and the management.

 

You do understand what a shareholder is right? Each share of a class gives equal rights and equal control. IMO anyone trying to gain control of a company without having majority ownership would be basically stealing shareholder rights. The business belongs to the shareholders NOT THE MANAGEMENT. Management is in charge of the company but The shareholders are in charge of Management. Management is not supposed to be so "safe" that the owners (shareholders) cant remove them or are forced to pay to remove management.

[giofranchi]

The problem imo is very simple and clear: you are confused on the difference between the owners and the management.

 

adesigar,

I think I know the difference between owners and management…

 

But, as I have said, there are very few general rules in business, and each situation requires its own right course of actions. Therefore, let me ask you: do you know BH? Have you studied the company? Its businesses? Do you feel comfortable your knowledge of BH is clear and deep enough?

 

If your answers are: yes! Then tell me why you should prefer to put Biglari in the same position as the average manager. Instead of making him feel safe and able to carry on his long term plan for value creation.

 

Who knows? You might even tell me something I had not thought before… ;)

 

Gio

 

[Parsad]

The greatest investor in history, who knows everything about enhancing value, never had such an agreement...nor would one ever cross his mind.  Even Buffett cannot put his ego ahead of his humility, no matter how much it might improve the "Buffett" brand.  Cheers!

 

The problem imo is very simple and clear: you are going on and on comparing Biglari to Buffett, he instead seems to suggest “if you are looking for the next Berkshire, look somewhere else!”.

 

Biglari knows very well that in business each situation is different, and the right course of action each time is different.

 

Buffett never had to deal with control. Munger referred to Buffett in the early days calling him “the serial acquirer”, but evidently to buy a very large percentage of Berkshire back then was not so expensive as to buy the same percentage of BH today. There is simply no way Biglari could get control over BH buying its equity today.

 

Yet, control is crucial. Anyone who runs a business finds out pretty soon how crucial control actually is! And, as I have always said, I want him to be in charge and to feel safe. The less time he worries about his position and about someone buying a lot of BH and starting questioning his business decisions and actions, the more time he can devote to enhance value.

 

Gio

 

The problem imo is very simple and clear: you are confused on the difference between the owners and the management.

 

You do understand what a shareholder is right? Each share of a class gives equal rights and equal control. IMO anyone trying to gain control of a company without having majority ownership would be basically stealing shareholder rights. The business belongs to the shareholders NOT THE MANAGEMENT. Management is in charge of the company but The shareholders are in charge of Management. Management is not supposed to be so "safe" that the owners (shareholders) cant remove them or are forced to pay to remove management.

 

+1! 

 

And "safe" do what?  Implement compensation packages, agreements, share classes, trademarks, name changes, etc?!  He would be "safe" if he focused solely on the management side, and less about his own security.  Cheers!

[Parsad]

The problem imo is very simple and clear: you are going on and on comparing Biglari to Buffett, he instead seems to suggest “if you are looking for the next Berkshire, look somewhere else!”.

 

Then why milk the whole Buffett philosophy and image, right down to even the look and typeface of his annual report?  But not live up to the ethics and shareholder-friendly standards set by him. 

 

Who knows, perhaps his "look somewhere else" statement should be taken as a precaution, rather than a goal or objective!  Cheers!

[giofranchi]

+1! 

 

I try to always be as polite as I can… but that post was a very poor one!

To endorse it is just as poorly done.

 

And "safe" do what? 

 

The fact is always the same: long term investments might bear wonderful fruits in the long run, but a lot of patience might be required. Because in the short run, instead, they might look like a drag on performance.

Therefore, if you think you have a great entrepreneur, who will maximize value in the long run, you want to put him in the conditions to proceed undisturbed.

 

Cheers,

 

Gio

 

[giofranchi]

Then why milk the whole Buffett philosophy and image, right down to even the look and typeface of his annual report? 

 

I don't know and I don't care. I completely overlook those things when I think about a business.

 

Gio

[adesigar]

The problem imo is very simple and clear: you are confused on the difference between the owners and the management.

 

adesigar,

I think I know the difference between owners and management…

 

But, as I have said, there are very few general rules in business, and each situation requires its own right course of actions. Therefore, let me ask you: do you know BH? Have you studied the company? Its businesses? Do you feel comfortable your knowledge of BH is clear and deep enough?

 

If your answers are: yes! Then tell me why you should prefer to put Biglari in the same position as the average manager. Instead of making him feel safe and able to carry on his long term plan for value creation.

 

Who knows? You might even tell me something I had not thought before… ;)

 

Gio

 

Id have any CEO in that position Buffett, Munger, Cummins & Steinberg, Gates, Jobs, Bezos, Dimon, Sinegal you name it. You can do a google search for any top CEOs select a name and add it to the list. They want control they need to own greater than 50%.

 

If your blanket is too short to cover your toes and shoulders the ideal solution is to bend the knees, don't try to grab someone elses blanket :) . Similarly if your funds are too low to gain majority control of a large company buy a smaller one and work up from there.

 

The only reason (that I can think of) to take control of as large a company as possible with limited funds is to maximize personal gains. The larger the company the more management gets paid. 100 million dollar companies don't give CEOS 10 million paycheques Billion Dollar companies do.

[giofranchi]

Id have any CEO in that position Buffett, Munger, Cummins & Steinberg, Gates, Jobs, Bezos, Dimon, Sinegal you name it. You can do a google search for any top CEOs select a name and add it to the list. They want control they need to own greater than 50%.

 

If your blanket is too short to cover your toes and shoulders the ideal solution is to bend the knees, don't try to grab someone elses blanket :) . Similarly if your funds are too low to gain majority control of a large company buy a smaller one and work up from there.

 

The only reason (that I can think of) to take control of as large a company as possible with limited funds is to maximize personal gains. The larger the company the more management gets paid. 100 million dollar companies don't give CEOS 10 million paycheques Billion Dollar companies do.

 

As I imagined, you haven’t added anything I hadn’t already thought about BH…

And I firmly believe you are wrong about it.

 

Gio

 

[petec]

 

Id have any CEO in that position Buffett, Munger, Cummins & Steinberg, Gates, Jobs, Bezos, Dimon, Sinegal you name it. You can do a google search for any top CEOs select a name and add it to the list. They want control they need to own greater than 50%.

 

 

Watsa?

 

It depends whether you trust them.  I would far rather have a man I trust (both to create value and in the ethical sense) have control than not, even if he doesn't own 50%.  And If I don't trust him, I don't want to invest alongside him no matter how much he owns.

[adesigar]

Id have any CEO in that position Buffett, Munger, Cummins & Steinberg, Gates, Jobs, Bezos, Dimon, Sinegal you name it. You can do a google search for any top CEOs select a name and add it to the list. They want control they need to own greater than 50%.

 

If your blanket is too short to cover your toes and shoulders the ideal solution is to bend the knees, don't try to grab someone elses blanket :) . Similarly if your funds are too low to gain majority control of a large company buy a smaller one and work up from there.

 

The only reason (that I can think of) to take control of as large a company as possible with limited funds is to maximize personal gains. The larger the company the more management gets paid. 100 million dollar companies don't give CEOS 10 million paycheques Billion Dollar companies do.

 

As I imagined, you haven’t added anything I hadn’t already thought about BH…

And I firmly believe you are wrong about it.

 

Gio

 

Since you have thought about it would you kindly share why Management should control a company and not shareholders. Can you also share what's so special about any CEO compared to the ones I mentioned that he needs to be made to feel safe to carry on long term plan for value creation, which by the way is every CEO's job.

[Parsad]

+1! 

 

I try to always be as polite as I can… but that post was a very poor one!

To endorse it is just as poorly done.

 

And "safe" do what? 

 

The fact is always the same: long term investments might bear wonderful fruits in the long run, but a lot of patience might be required. Because in the short run, instead, they might look like a drag on performance.

Therefore, if you think you have a great entrepreneur, who will maximize value in the long run, you want to put him in the conditions to proceed undisturbed.

 

Cheers,

 

Gio

 

Why was it poor to endorse that post?  I don't think he could have made the difference between management and ownership any clearer. 

 

Sardar works for the shareholders...his duty is to do his job, not feel "safe".  If the shareholders or owners want to toss him on his rear or keep him, that is completely up to them.  It's not up to Sardar to entrench himself, but to vote his shares the way he wants...that's it! 

 

The fact is that the shareholders kept getting the wool pulled over their eyes and agreed to many of the features that helped entrench him.  They finally said enough is enough on the compensation package, and so Sardar had to find a way around it. 

 

Did he not feel "safe" enough, is that why he had to buy back the fund business after selling it to the company?  Of course not!  It had nothing to do with it.  He just wanted to remove the cap from his compensation, and no one was going to stop him...not even the shareholders!  Can you believe that?  Cheers!   

[giofranchi]

Since you have thought about it would you kindly share why Management should control a company and not shareholders. Can you also share what's so special about any CEO compared to the ones I mentioned that he needs to be made to feel safe to carry on long term plan for value creation, which by the way is every CEO's job.

 

adesigar,

sincerely I think I have contributed more than enough to the BH discussion on this board… if you are really interested to know my view about the company and about Biglari, there is a whole thread to read…

 

Long story short: show me someone who might convince me he/she has the opportunity and the capability to create as much value as Biglari for the next 30 years, and I will start to treat Biglari less like a star… But if I think someone is a star, and I treat him like a star, and you don’t understand why a star should be treated like a star, than the problem is yours, not mine!

 

Gio

 

[giofranchi]

Did he not feel "safe" enough, is that why he had to buy back the fund business after selling it to the company?  Of course not!  It had nothing to do with it.  He just wanted to remove the cap from his compensation, and no one was going to stop him...not even the shareholders!  Can you believe that?  Cheers! 

 

Compensation is the only argument by the bears that really interests me. But even about the compensation topic we have different views.

As they say, to each his own!

 

Cheers,

 

Gio

 

[Valuebo]

The problem imo is very simple and clear: you are going on and on comparing Biglari to Buffett, he instead seems to suggest “if you are looking for the next Berkshire, look somewhere else!”.

 

Then why milk the whole Buffett philosophy and image, right down to even the look and typeface of his annual report?  But not live up to the ethics and shareholder-friendly standards set by him. 

 

Who knows, perhaps his "look somewhere else" statement should be taken as a precaution, rather than a goal or objective!  Cheers!

 

 

My thoughts exactly. Cognitive dissonance is a b*tch.

 

Case in point:

 

Then why milk the whole Buffett philosophy and image, right down to even the look and typeface of his annual report? 

 

I don't know and I don't care. I completely overlook those things when I think about a business.

 

Gio

 

You want trustworthy management but don't care for obvious shenanigans. Odd.

 

 

Full disclosure: I'm not a business owner. My thoughts are possibly shit.

[giofranchi]

You want trustworthy management but don't care for obvious shenanigans. Odd.

 

Ahahahahah!!!!

You think how you type your annual report is a shenanigan?!

 

Come on, Tom! You know to do something else, besides talking about cognitive dissonance??

 

Gio

 

[Sportgamma]

On January 11, 2013, Biglari Holdings entered into a trademark license agreement with him, stating it would pay Biglari 2.5 % of the company's gross revenues for five years under these conditions:

 

If there is a change of control at Biglari Holdings

If Biglari is terminated from the company without cause

If the CEO/chairman resigns from his employment due to an involuntary termination event

 

 

Is this for real?!

[giofranchi]

Did he not feel "safe" enough, is that why he had to buy back the fund business after selling it to the company?  Of course not!  It had nothing to do with it.  He just wanted to remove the cap from his compensation, and no one was going to stop him...not even the shareholders!  Can you believe that?  Cheers! 

 

Compensation is the only argument by the bears that really interests me. But even about the compensation topic we have different views.

As they say, to each his own!

 

Cheers,

 

Gio

 

Just to be clear:

 

The part I like the less in a 2 + 20 compensation plan is the 2… by far!

This notwithstanding I invest in GLRE and in TPRE, because they both have a long track record of outperforming the S&P500… AFTER FEES… That’s to say after their 2 + 20 compensation plans are carried out. If to that you add the benefit of float… well, nothing is for sure, but the potential there is certainly very enticing!

 

Now: with BH you don’t have to pay the 2.

 

This is how I think about compensation. And the argument “but he had promised to work for free!” doesn’t seem very convincing to me.

 

PS

I would also add that, though I admire Einhorn and Loeb very much, I like what Biglari is doing even better!

 

Gio

 

[frugalchief]

 

But don't kid yourself about why the trademark agreement was put in place.  It has nothing to do with long-term enhancing value and everything with entrenching himself.

 

 

It's good for another 19, going on 18 years (as long as there isn't a shareholder proposal to dismantle it).

 

As instituted by management, their modus operandi is to have long-term shareholders, who agree with the company's philosophy, objectives, and ultimately, managements ways of thinking and doing. 

 

Some call the performance based compensation entrenchment.  But, should Biglari continue to effectively work his ideas and build an empire at BH during the next 18 years 50 years (which I also believe he will), how would he entrench himself besides creating (hopefully "tons") of shareholder value?  Sure, this trademark is a safety net, but who in their minds would want to activate that trademark agreement...it's company suicide as BH continues to grow revenues to have to pay that out.

 

It would be a nice payday if that happened for him, but is that what he really wants?  He will make far more money long-term doing what he's been doing.....by increasing value of BH businesses and investments, his personal holdings, TLF holdings (which he & PC have an interest in), maximizing BCC's fees, increasing BH's intrinsic value, and making a performance fee for creating value.

 

I see everyones points and appreciate the opportunity to look at it from someone else's shoes....but then again, this is all IMHO.... ::)

 

 

[frugalchief]

The greatest investor in history, who knows everything about enhancing value, never had such an agreement...nor would one ever cross his mind.  Even Buffett cannot put his ego ahead of his humility, no matter how much it might improve the "Buffett" brand.  Cheers!

 

While I agree, aren't times different?  (I'm too young to even thing about how crazy the 70's must've been, let along 60's & 50's).  More investors.  More activists.  On a good note, there are a lot of 5% + holders of BH stock.  Doesn't that take stock to what Biglari has been doing at BH?

 

Wasn't Buffett still relatively little known to the whole investment community for a decade or two?  His personal holdings made all the difference regarding control, plus friends and family holdings, and of course it was a smaller company he took over.  Of course BRK is so large now it's almost impossible for someone to do something like this.

[frugalchief]

Similarly if your funds are too low to gain majority control of a large company buy a smaller one and work up from there.

 

The only reason (that I can think of) to take control of as large a company as possible with limited funds is to maximize personal gains. The larger the company the more management gets paid. 100 million dollar companies don't give CEOS 10 million paycheques Billion Dollar companies do.

 

Biglari gained control of Western Sizzlin with around 32% back in the day.  While it wasn't "majority" it was enough to influence lots of change.  While TLF ~15% in BH isn't majority, it's influence and a good amount of eating own cooking - that's practically all of it's assets.

 

How many 100mm companies have increased BV like BH has?  Or have the future outlook like BH - running towards opportunity, not reinvesting in same ole' business.  As I've mentioned in the BH thread, I prefer Performance Based Compensation (work get paid, don't work don't get paid).  That's how I make a living (commission based), so I'm a firm believer in it.  People are motivated by making more money.  As a shareholder I would be pissed if I was paying my manager some outrageous salary and he didn't do anything (increase value) to deserve it.  He would be too content on not doing anything if his salary was $10mm.  That would be personal gaining.

[frugalchief]

On January 11, 2013, Biglari Holdings entered into a trademark license agreement with him, stating it would pay Biglari 2.5 % of the company's gross revenues for five years under these conditions:

 

If there is a change of control at Biglari Holdings

If Biglari is terminated from the company without cause

If the CEO/chairman resigns from his employment due to an involuntary termination event

 

 

Is this for real?!

 

Yes....

 

http://www.sec.gov/Archives/edgar/data/93859/000092189513000091/ex101to8k07428_01112013.htm