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Is Sardar Making A Run At Wendy's?


Parsad
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Trian, the largest shareholder of Wendy's, said they were contacted by an interested party in taking over the company with Trian's assistance possibly.  Interestingly enough, Sardar cancelled the AAP tender a week earlier.  Anyone think he may be making a run at Wendy's?  It's smaller than AAP.  Cheers!

 

http://www.sec.gov/Archives/edgar/data/30697/000134547110000054/wen37.htm

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I am guessing "no". While Wendy's has the potential to be a cash flow monster, I just don't get the feeling that BH is going after it. What makes you think so, Sanjeev?

 

I agree - I doubt it. My guess is that Wendys was being looked at by PE acquirers, the sector seems a bit hot right now for them (the recent CKE acquisition).

 

I would imagine that Sardar's goal at AAP was to go activist and press the company to enact similar changes as Eddie Lampert pressed for over at AutoZone

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I thought about that for a quick second as well Sanjeev.  However with holders like Ackman and Peltz, Sardar would certainly not get this for a cheap price.  Which would make me think he won't be inclined to do it.  Howver I have been wrong ebofre and I will be wrong again, and it would actually be very interesting to see him try and take a compnay away from Peltz and Ackman for a bargain price.

 

Cheers

 

Michael

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Wasn't the AAP tender just a thinly veiled attempt to divert attention away from the compensation agreement? Can anyone argue otherwise given the terms of the tender?

 

I believe someone on a previous thread asked why he's not buying back shares?

I think it has to do with incentives. Although the compensation arrangement will supposedly compensate him for buy backs and make that neutral, it will, almost regardless of how they count it, shrink overall equity. Given that his bonus is derived from overall equity, anything that shrinks equity will also shrink his bonus (even after accounting for buybacks).

 

So why is the lionfund buying shares?

Well the shares might be thought of as a good bargain, or he might just want to increase the odds that his compensation scheme is passed. However, if the lion fund consists mostly of WEST debt and SNS shares (which it does) how valuable is that? If you're an investor with millions why would you invest in the lionfund? if you want Sardar to run your money for whatever reason (have you googled the guy?!) why would you choose LF over BH? Also, the earlier question remains, anyone who googles Sardar Biglari will quickly discover he's not the most trustworthy guy. So the type of capital he attracts will be different and quick to jump ship.

 

It's only a matter of time before someone points out the (obvious) insider trading (actually, i think i might just send an email to the SEC myself) that happened with the compensation agreement. While Sardar sold the company for $1, he sold his capital account for par. That capital account consists of a significant percentage of BH shares. It's not as obvious as some insider trading (likely why the SEC hasn't found it) but it's still the same. The guy then slaps everyone in the face -- he used that $4m (of which a percentage was derived from selling BH shares around $400) to buy back a lot of BH shares under $300.

 

Looking at Sardar through the lens he deserves, rather than the one he wants, shows you different motivations behind his actions.

 

Most of the (individual) shareholders who voted for him in the SNS proxy are gone. It sounds pretty crude but he exchanged them for money.

 

There are other red flags with Sardar as well, but no need to recap them all. We don't want the site getting coincidentally hacked again do we? One question that lingers with me, is does John Linnartz feel like a fool?

 

Oh, and to the person from this board that emailed my parable to the entire SNS corporate exec, I think you're awesome.

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Is Sardar is making a run at Wendy's?

 

Well, I don't know, but if it were the case, what would you think Dave Thomas (Wendy's funder) would say if he were still alive? I'll let every one of you think about your own Thomas post mortem quote.  ;)

 

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Gawd, let's hope that he's not targeting Wendy's.  All of the Wendy's restaurants that I have visited over the past 3-4 years have been very shabby.  I cannot imagine subjecting the chain to Sardar's modus operandi of chopping maintenance capex.

SJ

 

I'm surprised to hear that.  All of the Wendy's in my area are very well maintained, clean, and seem very well run.

 

--Eric

 

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Gawd, let's hope that he's not targeting Wendy's.  All of the Wendy's restaurants that I have visited over the past 3-4 years have been very shabby.  I cannot imagine subjecting the chain to Sardar's modus operandi of chopping maintenance capex.

SJ

 

I'm surprised to hear that.  All of the Wendy's in my area are very well maintained, clean, and seem very well run.

 

--Eric

 

 

 

For some strange reason, Wendy's uses carpet on the floors and padding on the chairs.  During a Canadian winter, the carpet gets very disgusting....and the vinyl on the chairs starts to split after a few years. 

 

Now MCD or BK have only tiles on the floors (which is very durable) and comfortable, but plastic-like furniture.  This is a much better model for a quick service restaurant.

 

SJ

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For some strange reason, Wendy's uses carpet on the floors and padding on the chairs.  During a Canadian winter, the carpet gets very disgusting....and the vinyl on the chairs starts to split after a few years. 

Now MCD or BK have only tiles on the floors (which is very durable) and comfortable, but plastic-like furniture.  This is a much better model for a quick service restaurant.

 

Maybe that's a Canada thing for them, because I don't think the Wendy's near me (Massachusetts) have carpet nor padding on chairs. If they do, I've never noticed them and I think I would if they were dirty or in bad repair.  The few times I've been in any  BK for instance in the last 5 years or so I've been grossed out by how disgusting the places were.  I've never had that happen to me at a Wendy's.

 

--Eric

 

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I'm not sure how happy Lion Fund partners are at this point.  He's pouring everything into BH.  That's $54M of BH stock already in the Lion Fund!

 

I am thinking the lion fund is now managing BH money. Since it is owned by BH, there is no conflict of interest. I see the whole thing as a complicated mess.

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No, I'm referring to the Lion Fund partner's perspective, not BH.  Most originally probably invested in the fund, assuming that they would have their capital in it for 20-30 years...an investment fund.  Now, it's starting to look more like a special-purpose vehicle that is completely in BH.  Cheers!

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I had the same thought, I wonder if BH is now a client of the Lion Fund, i.e. BH's extra cash is being invested in the fund.  This would explain the increase in assets in the fund.

 

There are still numerous conflicts of interest with this arrangement though.  BH and Biglari draw fees from assets invested in the fund.  If BH were to buy stock, it would be much more beneficial to shareholders if it bought it back and canceled it rather than buying it in a controlled fund.

 

I assume that the original investors in the Lion Fund are locked up, otherwise I don't know why they'd go along with the fund investing all of its assets in BH stock.  It is now being used as a tool for Biglari to control enough of the stock to pass an enormous pay package for himself.  He's abusing both his fund investors and shareholders.

 

Ironically, the fund's recent purchases are at about the same level as Biglari's purchases which were made at $15-17 split-adjusted.  What goes around comes around I guess.

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It would concern me as both a Lion Fund Partner or a Biglari Holdings shareholder.  That's a lot of capital being poured into BH stock.  There were a number businesses available in the open market at signficant discounts to intrinsic value over the last couple of weeks.  Yet, all this capital is being poured into BH at fair prices because they need to increase their ownership stake...that's alot of lost opportunity.  Cheers! 

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It would concern me as both a Lion Fund Partner or a Biglari Holdings shareholder.  That's a lot of capital being poured into BH stock.  There were a number businesses available in the open market at signficant discounts to intrinsic value over the last couple of weeks.  Yet, all this capital is being poured into BH at fair prices because they need to increase their ownership stake...that's alot of lost opportunity.  Cheers! 

 

Well, we don't know the intentions of the purchase... I do agree that there is cheaper stuff out there than BH, but, I also think that BH is cheap. Furthermore, if BH makes some sort of crazy awesome acquisition it could be very beneficial to the lion fund/BH. We don't know if BH has been deploying capital either; there are just too many intangibles.

 

I really don't think that the vote on the pay package is going to be close enough to be made up by Biglari's buying... Does anyone think that a few percentage points in ownership will make a difference? I after all the controversy on the name change, (which overwhelmingly passed) it is a tough sell for me. But, granted, Gabelli was on board with the name change...

 

 

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I really don't think that the vote on the pay package is going to be close enough to be made up by Biglari's buying... Does anyone think that a few percentage points in ownership will make a difference?

 

You never know.  Jonathan Dash had 48% of Denny's votes in his favor as a director.  All he needed was a few more.  Cheers!

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Mustang Capital just sold 4375 shares in two transactions, 3625 and 750 shares.  Otherwise they've been exclusively a buyer of the stock over the last year or so.

 

Curiously, on May 26 Mustang also sold 4375 shares in two transactions, 3625 and 750 shares (note the footnotes after the "I" which indicate that Mustang owns the shares):

 

http://www.sec.gov/Archives/edgar/data/93859/000119380510001552/xslF345X03/e607081_ex.xml

 

These transactions were actually mixed in with buys by Lion Fund.  I find it curious that the number of shares is the same in both of these red herring sale transactions.

 

Hard to speculate on why one fund is buying and another is selling, and they're all controlled by BH.  I have wondered if the funds participate in the tender offers that BH makes for other companies, they may buy shares in the target company and then tender them, which allows BH to issue more shares.  Then the fund can sell the BH shares that it acquired in the tender.  This allows BH to issue shares and the fund to book a profit.  These sales from Mustang might be the result of something like this.

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