Cracker Barrel (CBRL) will repurchase some $50 million in shares in a buyback program, the company announced, and also allow shareholders to vote on a dividend payout that would double its debt.
(CBRL also declared a regular quarterly dividend of 75 cents per share, payable beginning Nov. 5, and to shareholders of record on Oct. 18.)
The $20-per-share dividend was proposed by activist investor Sardar Biglari.
Biglari wants the restaurant and country store chain to borrow as much as $400 million – doubling its debt – to pay the special dividend. In all, it would cost the company $475 million, and drain off much of its cash.
“The board believes the payment of a special cash dividend of $20 per share is not in the best interests of the company and its shareholders,” the company said in a statement. “The board urges shareholders to vote against the proposal for the following reasons:”
• “The board is keenly focused on effective capital allocation that delivers long-term value to our shareholders, including all alternatives to return capital to all shareholders.
• “A $20 dividend, representing an aggregate dividend of over $475 million, would require a substantial increase in leverage and in the company’s risk profile. Such leverage would reduce the company’s flexibility to continue to invest in and grow the business in the face of changes in market conditions and other contingencies in a way that the board believes maximizes long-term results and enhances total returns to all shareholders.
• “The company’s policies have strongly supported the generation of significant cash from its operating business, allowing the company to triple its annual dividend from an annualized rate of $1 per share in November 2011 to $3 per share currently. This increase was achieved while the company maintained a prudent risk profile and allowed the operating results to significantly enhance the growth in the stock price.”
Shareholders will vote in a special meeting on Nov. 13.
The company was established in Lebanon, Tenn. in 1969 and now operates 624 company-owned locations in 42 states.