Tuesday, January 24, 2006

'And now for tonight's title bout...'

Another day, another restaurant company pressed by shareholders to restructure.

Or so reveals the extraordinary statement that Cracker Barrel’s parent issued late today, after the market had closed. CBRL Group disclosed that it’s in the first stages of “reviewing potential capital structure initiatives,” a lawyer’s way of saying a For Sale sign could be hung on at least some part of the company, if not the whole store. That clunker of a term could cover almost anything. A sale to a private equity company. A stock tender deal to go private. A merger with another complementary restaurant concern. Perhaps doing nothing at all.

Or, given the clues any seasoned press-release decoder could spot, the possible sale of Cracker Barrel’s sister chain, 156-unit Logan’s Roadhouse.

That’s my bet, given the reason CBRL cited for the announcement. It explained that “a significant shareholder” had come forward with a “suggestion” that the company consider some share-price-boosting “initiatives.” In the statement, CBRL did not divulge what those nudges were, but it acknowledged that some of the ideas had also been put forth by companies hoping to land the job of advising the restaurant operator during its consideration of the aforementioned “potential capital structure initiatives.” In other words, the heavy-duty suits who could hold the For Sale sign while CBRL execs hammered it into part of their spread.

“Typically we do not comment on our strategic planning initiatives before they are implemented,” said CBRL CEO Michael Woodhouse, offering what any reporter covering Cracker Barrel would certify as a monumental understatement. “But we have seen other companies being distracted by opportunistic or impatient investors who publicly pressure those companies to change their strategic direction.”

Unless you’ve just thawed out from a late-November glacier-exploration mishap, you’ll know he’s referring to the activist shareholders who’ve been recently complicating the lives of McDonald’s and Wendy’s officials. One, Pershing Square Capital, has successfully lobbied Wendy’s to earmark a portion of its Tim Horton’s donut chain for an IPO. Similarly, McDonald’s is selling its Chipotle chain, though it’s drawing the line at a partial divestiture of its company-operated stores, as Pershing has also demanded.

“Rather than be subjected to the distraction of second-guessing in a public forum, we elected to disclose our process, which was already underway,” said Woodhouse. The company “will comment on which, If any, of those we plan to implement when the review is complete.”

A review of SEC documents filed to date did not disclose any mention of Pershing or the other restaurant-focused activist shareholder that’s been in the news, Nelson Peltz’s Trian Group. CBRL’s three largest institutional shareholders were listed as Wellington Management Capital LLP, Mellon Financial Corp. and Allianz Global Investors of America LP.

No CBRL sharedholder has yet said anything publicly about the company’s statement. But in this age when shareholder-management skirmishes are often waged in public, that might soon change.


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