Steak n Shake shareholders asked to ignore Biglari, dissident shareholder group

By Lisa Kerner

Charlotte, N.C., Feb. 14 - Steak n Shake Co.'s board of directors cautioned its shareholders that a group of dissident shareholders led by hedge fund manager Sardar Biglari launched what could be a disruptive and costly proxy contest.

The group, which calls itself the Lion Fund or the Committee to Enhance Steak 'n Shake, is attempting to place two of its nominees on the company's board.

It was previously reported that Steak n Shake offered to nominate Biglari and Philip L. Cooley for election as directors at the 2008 annual meeting on March 7. The pair initially accepted the nominations but then declined after the company made changes to its bylaws.

By amending its bylaws, Steak n Shake effectively prevents Biglari and Cooley from calling a special meeting to replace the majority of the company's board immediately following the annual meeting as they had planned.

Biglari and Cooley had also demanded the board repeal the recent amendment to the company's bylaws that increased the number of shares needed to call special meetings of shareholders to 80% from 25%.

The board urged shareholders to vote using the company's white proxy card and to ignore the Lion Fund's gold proxy card.

"We believe that Mr. Biglari's effort is a poorly disguised effort to gain control of the Steak 'n Shake Co. without paying any premium to you, their fellow shareholders. In short, Mr. Biglari is, in our opinion, trying to take over your company without paying you anything in exchange," the filing stated.

Steak n Shake's board made its comments in a shareholder letter included as part of a form 8-K filing with the Securities and Exchange Commission.

In the letter, Steak n Shake reiterated its initiatives to maximize shareholder value, including:

• Implementation of personalized service;

• Improved hiring process for restaurant associates;

• Implementing a store-level management execution plan called "Leading from the Front";

• Reviewing the company's cost structure;

• Launching a simplified breakfast menu focused on hand-held sandwiches; and

• Testing a less expensive, more contemporary building.

Biglari is the chairman and chief executive officer of Western Sizzlin Corp. and the Lion Fund, LP. Western Sizzlin and its affiliates reported an 8.5% ownership interest in Steak n Shake, an Indianapolis-based casual dining restaurant franchisor.

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