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Dash Acquisitions & Dennys


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Great link. As some may guess, I am generally pretty sympathetic to any the cause of virtually any activist investor, and wish Dash and co. a great deal of luck. I don't know that there is quite the same case for him to get on the BOD as there was with Biglari and SNS; after all, SNS was hemorrhaging cash, whereas, DENN still has a respectable P/E. I will admit, DENN seems cheap, but I am not overly enthusiastic about it; their debt is more than their market cap. =O Which, in this environment, scares the bejesus out of me.

 

I am openly wondering if he is going to try to turn DENN into his own holding company, as, it seems that the restaurant will be able to produce significant and deployable cash flows in the future (provided that their debt load doesn't screw them).

 

Is anyone here long DENN? Any predictions? Thoughts?

 

 

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I don't have a position in Denny's but I am long DineEquity. It is not an easy space. DIN just released their latest earnings and showed continued same store sale declines at Applebees and IHOPs despite pretty easy comparisons. In the case of IHOPS the decline is accelerating. The National Restaurant Association Index suggests that these trends are continuing into 2010, http://www.restaurant.org/pressroom/pressrelease/?ID=1895.

 

It's difficult to see how an activist investor can do much about guest counts. The major QSRs competing with Denny's and IHOPs have done a decent job of cutting expenses and controlling capex, and the people who do come in tend to spend slightly more, but they've all increased their value propositions to limited effect.

 

EDIT: I meant 'casual dining' competition, not 'QSR'.

 

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  • 3 weeks later...

Our Rotary club meets at Dennys and the food is good but not great.  They just put out a new menu, but it didn't really change much.  I'm not sure that the owners understand today's market.  They talk health, but are still way too heavy on the grease.

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  • 1 month later...

The Committee got no board seats. Sad, but true.  Does anyone have any examples of when activists fail? How have they played out. Other than giving up, do they have to wait for another couple of quarters of bad earnings? Probably trolling through the bylaws?

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Just as I suspected, after seeing what Biglari did to SNS shareholders there was no way that they were going to vote for Dash.  Biglari should take a long hard look at this situation and learn something from this.  There is also no way that any future potential acquisitions are going to vote in favor of Biglari either.  He has made his job a thousand times harder from this irrational, unethical behavior.  One of the things that makes Buffett so successful is that he is well trusted and people want to do business with him.  Well, not Biglari!

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Proxy fights are not cheap.  I would think this fight cost the committee a minimum of $250K and from the number of filings on EDGAR, I would think the cost was closer to $400-500K!  If they had won, they could have recouped the cost from Denny's, but now they have to eat this.  It was a tough battle from the start, since Denny's wasn't in a precarious position, whereas Steak'n Shake was.  While Denny's management could have done a better job, they certainly weren't anywhere near running the company into the ground.  They could always go after Steak'n Shake instead!  ;D  Cheers!

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Now that would be interesting.  Dash trying to go after SNS.  All he would have to do is say that he would not ask for such a ridiculous incentive and he'd get the votes.  The last press release from Biglari sounded like he was not happy with Dash so maybe they are not great friends.  I can understand why.  I wouldn't be surprised if Biglari stabbed Dash in the back as it seems to be in his nature.

 

Are you listening Dash?  An easy take over target!

 

 

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The Dash proxy seemed to suffer from a lack of focus. He criticised, fairly in my view, failures on the part of management, but in such a broad way that the only practical solution would have been to replace management. Shareholders didn't have much of a specific platform to judge so the proxy became a battle of reputations.

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