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Kelley resigns at SNS


ragnarisapirate
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Below is the resignation letter of Wayne Kelley. From this filing:http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=6503969-1131-5775&type=sect&dcn=0000093859-09-000020

 

 

Split milk; I kind of wonder if the market will be 'surprised' tomorrow and sell off... I really hope that he sends a letter or gives specifics as to what he is so mad about...

 

I mean, if my cronies were ousted by a 30 year old value investor, after I had helped preside over the wrecking of the company that I love, I guess that I would be pretty angry too.  :D

 

 

The letter:

 

Gentlemen and Ruth,

 

            Over the last several months, I have thought about the wisdom of remaining on the board of directors of The Steak n Shake Company a number of times.  Obviously, I have very strong feelings for the company and its iconic brands.  However, as time has gone on, I have felt that my contributions, as well as those of other board members, have not been welcomed or appreciated.  I have also thought that the advice of board members has not been sought, either before or after major decisions affecting the company.  In my various corporate experiences over the years that I have been involved in business, both as an officer and as CEO, Chairman and/or a board member, I have expected (either as a participant or as the person more in control) that there would be an active interaction between the leaders of a company’s management and its board of directors.  There was to be a partnership in developing and monitoring the company’s vision and goals.  Unfortunately, I do not find that to be the case with the current situation at The Steak n Shake Company.

 

            In my opinion, the current leadership of the Steak n Shake Company is less interested in the company and the brand than in the leadership itself.  I also believe that although our current chairman and CEO espoused openness and transparency, the opposite has been the case.  The board has not been actively involved in developing the vision and strategy of the business, but rather has been informed about it belatedly.  This is a public company; it is not a company that is controlled by one or a few individuals.  It would seem that the best way to proceed would be to solicit informed opinions, even if they were not consistent with the person or people in charge.

 

            Since, in my opinion, there does not appear to be any desire to appreciate or be receptive to other points of view on the board of directors than the current Steak n Shake chairman’s position, I am hereby resigning from the board of directors of The Steak n Shake Company effective on Sunday, March 22, 2009.

 

            I would conclude by wishing my best to a brand that is very close to my heart.

 

                                                                                      Respectfully,

 

                                                                                      Wayne L. Kelley

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I don't think the market is going to sell off.  Kelley was there when the ship was going down and when it rose.  Sardar was there when it rose and if he isn't listening to Kelley (who is on the board), then I'm guessing the company is going in the right direction.  If you were a shareholder, would you rather keep Kelley or Sardar running the company.  Pretty easy choice!  Cheers! 

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Well, it shouldn't matter if the market sell off or not tomorrow. It can goes up or down significantly, or it can be nearly unchanged. The stock market is not there to teach you, but to serve you. So, the tomorrow reaction is not the point. The point is that you have Mr. Kelley's opinion now about Sardar Biglari, a "new card in your hand", and you should see if your opinion on Sardar Biglari has changed or not, and if so how.

 

I'll let everyone judge that by themselves without any personal comment.

 

Cheers!

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Point of the post was that it was an interesting letter... I also just saw that I wrote "split milk" rather than "spilt milk" in regards to Kelley probably just being mad about the whole situation.

 

I am with you guys that the market is a tool, and in all honesty, I hope that SNS goes down a ton so that I can buy more of it at a huge discount... Just because we all think that Mr. Market can be pretty crazy doesn't mean that his actions are not interesting to watch!

 

 

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The point is that you have Mr. Kelley's opinion now about Sardar Biglari, a "new card in your hand", and you should see if your opinion on Sardar Biglari has changed or not, and if so how.

 

Actually I'm more relieved that Kelley is out.  He was part of the board that resisted Sardar's request for board seats originally.  They implemented changes to shareholder policy that prevented a special meeting of shareholders.  Kelley was part of that action.  That was completely to save their own hides and prevent the meeting.  I was actually more concerned that he was staying on when Sardar first took over, so I'm actually quite happy he is out.  Cheers!

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I'll let everyone judge that by themselves without any personal comment.

 

Cheers!

 

why no personal comment? most comments cant escape being personal on some level, even when 'objectivity' is strived for.

 

i think kelly's letter probably reveals more about himself & his own ego (as if he's saying, please listen to me! give me the credit that's due me!! etc) than it does sardar. espcially as he was part of the old guard that brought his "beloved brand" to the brink of collapse in the first case, & paid themselves unreasonably well in the process.

 

until its shown that he is other than some lone, wounded voice crying out in the wilderness, i'm glad to see him go.

 

i only worry that he goes on to ally himself with some other opportunistic investment group that itself seeks to agitate for change, & ultimately control before the fruits of sardar & his teams hard work is given time to happen.

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Kelley doesn't own enough stock to do anything... even if he could get a group of dissident shareholders together, do you really think that he could do much? Sardar and Co got about 75% of the votes at the last annual meeting. That is well more of a mandate than it would take to amend the US constitution (which happens pretty rarely).

 

I can hear Kelley's explanation now... (I hope you can hear the sarcasm coming through)

 

"Chairman Biglari is running the company into the ground... under his leadership, the price of the stock has gone up, while the broader market has gone down in excess of 30%. Keep in mind, this is despite the company's real estate being worth less now than it was a year ago. Obviously, the market has faith in what he is doing... BUT I DON'T! After all, he is doing horrendous things like making the company more efficient and allocating capital as soon as he sees what can be done... I should run the company, since I destroyed shareholder value and helped to put together a plan so that the company would lose market capitalization, despite having more stores."

 

Yeah right! The guy doesn't even have a butt to sit on-let alone a leg to stand on!

 

 

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Some interesting events over the last two months regarding the board of directors at SNS. 

 

- First in January, Dr. Ryan said that he would not stand for re-election.  He had served since 1996.

 

- In mid-February, David Milne resigned.

 

- Followed by Ed Wilhelm and Steven Schmidt.  Wilhelm and Schmidt joined the board in 2006 and 2005 respectively.

 

- On March 16th, Dr. Ryan suddenly changed his mind and decided to stand for re-election. 

 

- Immediately following that on the 17th, Wayne Kelley said he would not stand for re-election.  Kelley had served since 2003. 

 

- On the 22nd, Kelley decided to submit his letter of resignation.

 

What's clearly obvious is that the board has remained somewhat fractured, even with the number of previous resignations and Sardar, Phil and a couple of new directors on board.  It looks like some of the old-time boardmembers supported Sardar, while others had a different agenda perhaps in line with Kelley's. 

 

While a good board encourages different views, I'm guessing it wasn't just views, but the direction of the company including how cash flows should be allocated.  Not going to happen!  I would expect the board to spend less time bickering now, and more time focusing on increasing customer traffic.  Cheers! 

 

 

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Kelley doesn't own enough stock to do anything... even if he could get a group of dissident shareholders together, do you really think that he could do much?

 

if some other investor group or restauarant holding co, with whom kelly is aligned, offers to purchase sns at 12 or even 10, citing a 30% plus premium to current market price & a new "shareholder friendly direction" (by his- kellys'- myopic, selfserving, definition) in contrast to the picture kelly paints of sardar & mngt, then YES, i'm a little worried that we are vulnerable. at 15% sardar & his group doesnt really own a big enough percentage to fend off an offer like that, does he? not in this itchy, punter happy environment? but maybe i'm just being hyper sensitive about a co & a chairman/ceo that i'm emotionally as well as financially involved with.

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Below is the resignation letter of Wayne Kelley. From this filing:http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=6503969-1131-5775&type=sect&dcn=0000093859-09-000020

 

In my opinion, the current leadership of the Steak n Shake Company is less interested in the company and the brand than in the leadership itself.  I also believe that although our current chairman and CEO espoused openness and transparency, the opposite has been the case.  The board has not been actively involved in developing the vision and strategy of the business, but rather has been informed about it belatedly.  This is a public company; it is not a company that is controlled by one or a few individuals.  It would seem that the best way to proceed would be to solicit informed opinions, even if they were not consistent with the person or people in charge.

 

this is in direct contradiction to sardars investment day letter from the chairman of 10-21-08 in which the following is stated in summary before going into more detail:

 

"The sine qua non in carrying out a successful program, in our view, is to set the

following goals: to form a strong management team, achieve a low cost structure, maintain a

sound balance sheet, establish a focused strategy, and ultimately execute the plan decisively.

Currently, we are shifting resources and changing processes to implement our plan."

 

http://www.steaknshake.com/chairman.pdf

 

everything sardar & mngt has done since has been decisively & single-mindedly geared to achieve the goals set out in his letter, imo.

 

and how, by kellys' definition, is sardar & mngt "less interested in the company and the brand than in the leadership itself." ? it certainly isnt in the sense that kelly & his old cronies were interested in THEIR leadership ranks.... out-sized compensation packages & egregious stock option grants! sardar pays himself & his mngt a pittance comparatively, & sardar himself takes no stock options, nor does he opportunistically trade & cash out his holdings at every turn like he had a hot potato in his hands.

 

i dont get what kellys beef is, unless its wounded pride & nothing more.

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If Sardar continues to get positive operating results at Steak'n Shake, it would be difficult for Kelley to supplant him unless he could get a 25-30% position.  Steak'n Shake's CEO was voted out not because of Sardar's ideas, but the fact that they couldn't be any worse than what was already happening.  Shareholders were frustrated.  I think the mood of shareholders would be slightly different if anyone decided to start a proxy fight.  Cheers! 

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This article in the Indianapolis Business Journal backs up what I was saying about the board.  As we all know, Sue Aramian and Charles Arnett, who were both close associates of Wayne Kelley's father E.W. Kelley (who grew the chain to what it was in 2003), seem to be on Sardar's side.

 

http://www.ibj.com/html/detail_page.asp?content=34444

 

The article also says that if things continue to trend as they are going under Sardar's leadership, the company may break a 14-quarter streak of declining sales.  And this isn't the most hospitable of environments for the restaurant industry. 

 

I have to think that Kelley's letter may have to do more with not being heard as the CEO, and son of the modern-day founder, than whether it was an issue of operations or board transparency.  The company had to change course, or it would have been finished by next year without Sardar's ideas.  Cheers!

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I think the mood of shareholders would be slightly different if anyone decided to start a proxy fight.

 

agreed.

 

but its not a proxy fight i'm concerned about, its a buyout offer, with or without kelly on board to provide a sort of quasi-legitimacy as an ex ceo, board member, & son of the late ew kelly. in this environment where investors are sitting on massive losses & are fearful of the future is a 15% insider ownership enough to defeat a take over offer at 10 or 12? in normal times, probably. today, i'm less certain.

 

still, you're right that its a remote possibility either way, so its probably absurd that i even brought it up.

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I think the mood of shareholders would be slightly different if anyone decided to start a proxy fight.

 

agreed.

 

but its not a proxy fight i'm concerned about, its a buyout offer, with or without kelly on board to provide a sort of quasi-legitimacy as an ex ceo, board member, & son of the late ew kelly. in this environment where investors are sitting on massive losses & are fearful of the future is a 15% insider ownership enough to defeat a take over offer at 10 or 12? in normal times, probably. today, i'm less certain.

 

still, you're right that its a remote possibility either way, so its probably absurd that i even brought it up.

 

 

If they come in and do a buy out of the company at 10-12/share, it would undervalue the company by a ton.

 

Good scenario: Shareholders reject. SNS gets to it's full value in a few years... I make a killing.

 

Bad scenario: Shareholders accept. I get rid of my shares for 10-12/ea and double my money in the process... granted, I lose an undervalued asset, but there are enough cigar butts out there that I don't get too upset.

 

Worst Scenario: Shareholders reject. SNS has a Jack in the Box/Chi-Chi's style e coli infestation, and has to liquidate... I probably break even, or do a bit better.

 

regardless, I don't see current share holders doing too bad.

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