FINANCIAL REPORTING AND ANALYSIS

ACG - 6175

SHOWDOWN AT CRACKER BARREL

In September 2011, activist investor Sardar Biglari initiated a proxy contest seeking election to the board of restaurant company Cracker Barrel. Although Cracker and Barrel was highly successful from 2002 through 2007, the company had subpar performance during the recession and the years following. Biglari, who owned 10% of Cracker and Barrel, was disappointed with the performance and argued for better financial reporting and demanded strategic changes. Cracker and Barrel fought back. Proxy advisory services, ISS and GL, were split. This case explores issues around hedge fund activism. In particular how activist hedge funds identify targets for activism and how they develop an investment thesis.

d. How does Cracker Barrel's performance compare to your peer group?