Biglari goes forward with AAP exchange offer

[investor99]

Is this a joke?

 

http://sec.gov/Archives/edgar/data/93859/000092189510000806/s4a107428_05172010.htm

 

Who is going to trade an AAP share valued at $45.75 for 0.1179 shares of BH valued at $36.16?

 

I'm really starting to think this guy needs to have his head examined.  He's looking like a total amateur.  I would love to see the results of this offer as well as the result of the shareholder vote for his salary increase.

 

This is getting ridiculous!

[investor99]

I'm trying to come up with a reason for this irrational behavior. 

 

Two possible reasons for this recent irrationality are he's pulling a "Brewster's Millions" or a has a "Beautiful Mind."

 

But there is certainly something rotten going on, in my opinion. 

[ragnarisapirate]

I'm trying to come up with a reason for this irrational behavior. 

 

Two possible reasons for this recent irrationality are he's pulling a "Brewster's Millions" or a has a "Beautiful Mind."

 

But there is certainly something rotten going on, in my opinion. 

 

Well, if anyone is dumb enough to tender shares, then more power to them; I, and other shareholders will be richer than I was before. :)

 

Granted, mass tendering prolly won't happen, but it wouldn't take that many shares to justify the filing fees and such. Plus, it generates attention to what the guy is doing at the Holding Company level: trying to buy things for less than they are worth.

[Parsad]

An article on the share price slide:

 

http://seattletimes.nwsource.com/html/businesstechnology/2011888707_apusbiglariholdingsmover.html

 

I would not be surprised to see litigation against the company at some point...I'm surprised the parasites haven't jumped on it already.  The shares are down 23% since they announced the pay package proposal, and Biglari Capital sold all their shares before the slide.  Usually, the class-action guys are all over these things at this point.  Cheers! 

[collegeinvestor]

Where is BH going to get the cash to buy these shares? They don't have that much treasury stock? Isnt it right to say as of now they only have 20.32 milliop n in BH stock? Thanks for the help.

[Myth465]

The hedge fund sold the shares at the top then announced the package. Thats quite interesting.

[cooger72]

Myth,

How do you figure Lion Fund sold shares?

[Myth465]

Myth,

How do you figure Lion Fund sold shares?

 

Im basing this on Parsad's comments. I probably should have included a question mark.

[Parsad]

Im basing this on Parsad's comments. I probably should have included a question mark.

 

I should probably caveat that with if and when they complete the transaction.  According to the filing:

 

http://www.sec.gov/Archives/edgar/data/93859/000092189510000667/form8k07428_04302010.htm

 

Pursuant to the Stock Purchase Agreement, Mr. Biglari sold all of the shares of Biglari Capital to the Company for a purchase price of $1.00 plus (i) an amount equal to Biglari Capital’s adjusted capital balance, if any, in its capacity as general partner of the Lion Fund, and (ii) an amount equal to the total incentive reallocation allocable to Biglari Capital for the period from January 1, 2010 through April 30, 2010, less any distributions in respect of such amounts previously received by Mr. Biglari.  The payments set forth in clauses (i) and (ii) above represent solely those amounts that have accrued to date to Biglari Capital, as general partner of the Lion Fund, estimated at closing to be $4.175 million.  The Stock Purchase Agreement contains customary representations, warranties and indemnities.

 

Anyone who reads that would be under the impression that the deal is complete or at least is binding.  That means he sold his stake in the general partnership, including all investments the general partner had in the Lion Fund (estimated at $4.175M at April 30th, 2010), for the sum of one dollar.  That would include any holdings in BH he owned through the general partner.  Obviously he didn't intend for the stock price to fall after putting out the compensation proposal, but usually the parasite class-action guys will try and say he did.  Cheers! 

[ERICOPOLY]

Obviously he didn't intend for the stock price to fall after putting out the compensation proposal, but usually the parasite class-action guys will try and say he did. 

 

 

It might be true that he didn't intend for the stock price to fall, but I have trouble believing that he did not expect it to fall.

 

I expected it to fall.  Who here didn't expect the share price to fall?

 

His compensation proposal destroys intrinsic value per share...  there is only one way you can expect a stock to react to that kind of news.

[shalab]

It is not clear what happens to the SNS shares held by the Lion Fund - it would appear that they got retired at the market price on April 30th before the compensation agreement came out?

 

 

[Tim Eriksen]

It seems clear to me that the SNS shares are held in the Lion Fund, which Biglari Capital is the general partner.  The GP is being sold by Sardar to SNS.  The Lion Fund will continue to operate.  The SNS shares held in the Lion fund are indirectly owned by the investors of the Lion Fund.  Thus they were not retired.    

[Parsad]

The shares owned by Lion Fund partners remain in the Lion Fund, but I believe Sardar's ownership through the GP would be liquidated upon the sale of Biglari Capital to Biglari Holdings...thus the $4.175M payout.  Biglari Capital would continue to own the shares, but Sardar would have sold his ownership in Biglari Capital, thus liquidating his position at April 30th.  Cheers!

[tiddman]

an amount equal to the total incentive reallocation allocable to Biglari Capital for the period from January 1, 2010 through April 30, 2010, less any distributions in respect of such amounts previously received by Mr. Biglari

 

This will likely reap Biglari about $1M in compensation... I believe the Lion Fund held approximately 76k shares of BH at April 30.  BH share price went from $324 at the end of 2009 to $391 at April 30.  Biglari would be entitled to about 20% of this $5M in appreciation or $1M.  The timing of this transaction is obviously very fortuitous since that was near a 5 year peak price for the stock, and 25% above today's quote.