SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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by the Registrant [X]
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by a party other than the Registrant [ ]
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| [ ] | Preliminary Proxy Statement |
| [ ] | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| [ ] | Definitive Proxy Statement |
| [X] | Definitive Additional Materials |
| [ ] | Soliciting Material Pursuant to §240.14a-12 |
THE
STEAK N SHAKE COMPANY
(Name
of Registrant as Specified in its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
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of Filing Fee (Check the appropriate box):
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This
filing consists of a
letter being mailed on February 27, 2008 by the Steak n Shake Company ("the
Company") to its shareholders with respect to the matters being voted on
at the
Annual Meeting of Shareholders to be held on March 7, 2008. The Company
has filed a definitive proxy statement with the SEC in connection with the
Annual Meeting.
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PROTECT
YOUR INVESTMENT
BY
VOTING
THE ENCLOSED WHITE PROXY
CARD TODAY
February
27,
2008
Dear
Fellow
Shareholder:
On
February 14 we mailed you a letter
asking that you
wait to hear both sides before you voted on the issues in the 2008 Annual
Meeting of Shareholders. We mailed our proxy
material to you on
February 21. We encourage you to read these materials carefully
and to vote FOR the Board’s nine director nominees, FOR the ratification of
Deloitte & Touche as the Company’s auditors and FOR the 2008 Equity
Incentive Plan. We are enclosing another copy of the WHITE proxy card
for your convenience. Every vote matters at this important time for
the Company.
As
you know, a group of dissident
shareholders
calling themselves The Committee to Enhance Steak N Shake is conducting a proxy
contest. This group is led by a hedge fund managed by Sardar Biglari, who
began investing in our company less than one year ago (the “Lion
Fund”).
The
Lion Fund’s recent communications
show that it is not interested in you or the
Company. For the reasons
below, and those we have previously articulated, we ask you to reject Lion
Fund’s efforts, disregard any gold proxy he may have sent
you and vote the enclosed
WHITE proxy
card today (either by signing and
returning it, voting via telephone or voting via the
internet).
MESSRS.
BIGLARI AND COOLEY DO NOT HAVE
ANY EXPERIENCE RUNNING A COMPANY LIKE STEAK N SHAKE.
As
we have outlined in other
communications with you, the Company has been implementing important initiatives
to improve store-level execution and increase guest traffic which we believe
will enhance the Company's brand and improve its financial
performance. Mr. Biglari's criticism of the two
directors he seeks to replace, the
Company’s Chairman, Alan
Gilman, and Lead Independent Director, Jim Williamson, is
nothing more than the fact that each
has been CEO of the Company. Both have made substantial contributions
to the Company and shareholder value for many years. Moreover, as
previously announced, the Company is searching for a new
CEO.
In
contrast, Mr.Biglari and
his fellow nominee, Philip Cooley,
have no experience running a company such as Steak N Shake. They
obtained positions on the board of Western Sizzlin', a franchise business in
which the company does not operate any of its own restaurants. In
short, Mr. Biglari has not shown that he or Mr. Cooley will bring any direct
restaurant operating experience to the Board of Directors and Company management
to improve operations, achieve better financial results and increase shareholder
value.
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THE
PROXY CONTEST SHOWS THAT LION FUND
IS NOT INTERESTED IN SHAREHOLDER VALUE, BUT INSTEAD INTENDS TO
PURSUE
ITS
OWN AGENDA.
To
avoid a costly disruptive proxy
fight, your Board of Directors offered Lion Fund the two seats it seeks on
an
eleven person Board. That
would have provided Lion Fund with
18% of the Board
representation
–
more
than
twice its ownership percentage. Lion
Fund rejected our
offer and is proceeding with its plans to replace two of the Company’s
most
experienced directors. Moreover,
as
shown in the following statement from
Lion Fund’s proxy materials, Lion Fund expects
to spend your money on seats
it could have
had for
free. As it
admits:
“Costs
of this solicitation of proxies
are currently estimated to be approximately $300,000.
The
Committee estimates that
through the date hereof, its expenses in connection with this solicitation
are
approximately $175,000. We
intend to
seek reimbursement from the Company of all expenses we incur in connection
with
the solicitation of proxies for the election of the Nominees to the Board at
the
Annual Meeting.”
The
Company is likely to
spend a similar amount in defending this unnecessary
proxy
fight. We think these actions show that the Lion Fund is pursuing its
own agenda and not the interests of all shareholders.
LION
FUND’S ARGUMENTS ARE
BASED ON UNSUPPORTED ASSERTIONS.
Assertions About
Current Leadership
Lion
Fund says it is not trying to take
control of the Company and instead “needs” to replace the Company’s Chairman
and Interim Chief Executive
Officer, Alan Gilman, and
Lead Independent Director, Jim Williamson with its own nominees. Lion
Fund asserts that they
are
the “main source of the
Company’s problems.” Lion Fund reached this conclusion having never
met or even spoken with Mr. Williamson, having never attended a Board meeting,
having been an investor in the Company for less than a year,
and after having
a single non-substantive meeting
with Mr.
Gilman.
In
contract, Mr. Williamson served as
CEO of the Company from 1985 through 1991 and has participated in the Board
from
1985 through the present. During his tenure as CEO he helped solidify
the Company’s financials and prepare it for growth. Mr. Gilman served
as CEO during the Company’s significant growth from 1992 through 2003, a period
during which the number of Steak n Shake restaurants grew from 120 to 413 and
revenue grew from $127 million to $499 million. What operational
experience do Lion Fund’s nominees have? They have less than two
years of experience at Western Sizzlin’ during which they converted it to a
wholly franchised model and used the proceeds to take positions in other
restaurant companies, an action that has its own governance
issues. They have absolutely no experience running a company that has
a significant number of owned restaurants, however.
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Assertions About
Board
Share Ownership
Lion
Fund also asserts that
the Board does not have an
investment in the Company and that incumbent directors “have been net sellers
over the past
several years, disposing [sic] a
considerable amount of their
holdings.” The facts
are:
|
·
|
Only three
nominees have sold stock
in the past
few years (and these
three continue to retain individual ownership of over 300,000
shares).
|
|
·
|
Every
nominee owns more
stock than Mr. Biglari owns
personally.
|
|
·
|
Mr.
Gilman is the Company’s second largest individual
shareholder
and
has never
sold a share of
his Steak N
Shake
stock.
|
|
·
|
Mr.
Williamson is the Company’s
third largest individual
shareholder.
|
|
·
|
The
Board, in general,
and Messrs. Gilman and
Williamson,
in particular,
have
more of their
personal assets
tied to the Company’s success than
does
Mr. Biglari.
|
Lion
Fund’s argument that the Board’s interests are somehow
not aligned with shareholders simply ignores the facts.
Assertions About
the
Basis for the Company’s Performance
In
its February 21 letter the Lion Fund
concludes that “the company is handicapped by a lack of leadership, lack of
execution, and lack of strategic direction from headquarters.” It
bases this conclusion
on visits to “Steak n Shake
restaurants and [conversations with] current and former employees, franchisees,
shareholders, and other constituents.”
We
do not know whom Mr. Biglari spoke
to, but it was not our Board or our senior management team, which is working
diligently to improve our performance by implementing significant G&A
expense reductions, intensifying an integrated store level execution plan,
implementing “Personalized Service” to support improvement in the guest
experience, leveraging the point-of-sale food cost system to attempt to drive
significant cost savings, simplifying the menu, improved fountain design,
strategic marketing programs and select new product
development.
Winning
a Board Seat Should Not
Entitle
Lion Fund to
Dominate
the
Board
Perhaps
most disturbing is the Lion
Fund’s assertionthat
if
it wins its short slate
contest, it would have a
mandate from shareholders
to
control the
Company. As it writes in its February 21 letter, “We are seeking your
vote to replace Gilman and Williamson with the recommendation in my letter
of
January 23 outlining our plan for the company. Our
victory
would be the basis on which the
remaining directors are obliged to act to benefit you,
the
owners of the company. Once
elected, we are hopeful that the remaining directors will not take action
against your wishes because doing so certainly is not in anyone’s best
interests. Otherwise, these directors would risk their
reputation.” The
reality is that this election is not
an endorsement of Lion Fund’s plans and it should not be. The
responsibilities of directors are to evaluate risks and opportunities
and
make decisions that are in the best interests of all
shareholders. Accordingly, if two Lion Fund representatives are
elected to the Board they will have the same obligation that any other director
has – to
work with other members of the Board
to further all shareholders’ interests, not just their own.
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Lion
Fund appears to be distancing
itself from its
plans to control the Board. On January 23, Lion Fund
wrote
that “. . . [we] are looking
to replace
the
majority of the board with
a new slate of directors. Our plan is to obtain two board seats at
the next annual meeting and then call a special meeting to vote on replacing
most
of the
board.” Less
than a month later, Lion Fund recharacterized
its plan as follows:
“I disclosed in my January
23 letter that it is our
objective to replace Gilman and Williamson at the annual meeting and then seek
to call a special meeting to make further
changes in board composition.” Does
it want to “replace the majority of
the Board” or make “further changes in board composition?”
The
fact that you do not know what their
plans are creates an unacceptable risk to shareholders of bringing them on
the
Board.
If
the Lion Fund truly was interested
in creating
shareholder value it
would
commit to working collaboratively with the Board rather than making threats
about
changing directors.
LION
FUND’S REJECTION OF THE 2008 EQUITY
INCENTIVE PLAN WOULD HARM
THE
COMPANY’S SEARCH FOR A
NEW CEO.
Lion
Fund is recommending that you
vote against the 2008
Equity Incentive Plan (“Plan”). The Plan
is
intended to align the interests of
management with
shareholders by enabling the Board to put a significant percentage of
management’s pay “at risk” based on the Company’s stock
price.
We
are currently looking for a CEO to
lead our operational
turnaround. Any
compensation arrangement for a new CEO should make sure that a significant portion
of his/her
compensation includes
equity-based incentives that would be at
risk if he/she does not perform.
Similarly, we need to
offer long-term equity to attract and retain other senior leaders. If
Lion
Fund had its way, the new
equity plan we need
would make that objective impossible and severely impair the Company’s ability
to obtain talented leadership at the CEO position.
PROTECT
YOUR INVESTMENT BY VOTING THE
ENCLOSED WHITE
PROXY CARD TODAY.
We
understand that shareholders are
disappointed with the decrease in the value of their investment. As fellow
shareholders, your Board and management team share your disappointment.
However, we do not believe giving Lion Fund an opportunity to disrupt the Board
and further its goal of controlling your company is the right way to maximize
shareholder value. We hope that you will agree with us and urge you to
vote the WHITE
proxy
card at your earliest
convenience.
If
you have any questions about our
campaign or need assistance in voting your WHITE
proxy
card we encourage you to call our
proxy advisers, MacKenzie Partners, Inc., Toll-Free at (800) 322-2885 or (212)
929-5500 or by email at proxy@mackenziepartners.com.
Your
Board and management team thank you
in advance for your support.
Sincerely,
The
Board of
Directors,
The
Steak n Shake
Company
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