Value Investing

ValueX Vail 2015: Biglari Holdings – Maran Capital

Maran Capital Management presentation on Biglari Holdings from the ValueX Vail, June 24, 2015.

Biglari Holdings – A ~50-65c Dollar

Price is what you pay:$410/sh(~$850mm market cap)

Value is what you get:

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Biglari Holdings

Executive Summary - Biglari Holdings (BH -$410):

  • Platform company comprised of cash, investments (largest holding: CBRL), and operating businesses Steak n Shake, Western Sizzlin’, Maxim, and First Guard
  • Run by Sardar Biglari: entrepreneurial CEO who is a proven operator and capital allocator
  • Core operating business Steak n Shake undergoing resurgent growth through capital-light franchising and traffic-driven same store sales
  • Significant Margin of Safety: the stock is trading close to cash/investments on the books net of all recourse debt and deferred tax liabilities
    • Investors are essentially getting Steak n Shake for free, and are paying nothing for any future capital allocation-driven upside
  • Conservative intrinsic value estimate: $650+ per share (and growing); potential for $800+ within three years
  • Opportunity created by complex structure, and controversy over corporate governance and executive compensation
  • Recent tender for ~1/4 of outstanding shares at $420/shby fund controlled by CEO –he seems to think it is very cheap at these levels and is backing up the truck

Steak n Shake

  • 81 year old iconic American brand
  • $765mm 2014 net revenue
  • 417 company-owned stores (AUV: ~$1.8mm)
  • Estimated company-owned restaurant EBITDA $75-85mm/yrover last three years
  • Renewed focus on franchising –129 franchised stores, up from 71 in 2010
  • 239 franchises in the development pipeline at YE fiscal 2014

Steak n Shake - Same Store Sales

Biglari Holdings

  • Remarkable traffic-driven turnaround in same store sales by present management starting in 2009 –lowered prices, improved quality
  • 25 consecutive quarters of positive same store sales
  • ~30% cumulative increase in same store sales since 2009

Steak n Shake - Franchise Business

Biglari Holdings

  • Franchise Fees and Royalties have grown at a 30.6% CAGR since the beginning of the franchising initiative (FY 2010)
  • Estimated direct franchising expenses were $10-12mm in 2013 and $17mm in 2014 –the company is spending up front to build the business
  • BH targets franchise initiative break-even in 2016

Steak n Shake - Value

Valuation Summary –Base Case:

Company-Owned –8x run-rate EBITDA of $75mm = $600mm (~11 –12x FCF)

Franchise –20x steady state FCF contribution of $7.5mm = $150mm

Total SnS–$750mm Enterprise Value

Higher Valuations are Possible:

Upside Case –$85mm of company-owned EBITDA and $15mm Franchise FCF stream a few years out: fair intrinsic value could be $950mm+

IPO Scenario –What would SNS trade at in these markets if it were IPO’d?


Turnaround Effort Underway

  • Cut cover price –$5.99 to $3.99
  • Improved quality –larger and higher quality paper
  • New editor/team –Editor Kate Lanphearformerly of NYT and Elle
  • Ad pages up 63% on average 2015 YTD vs. 2014
  • 26 vs. 16 per issue on average
  • March 2015 print ad revenue up 200%+ y/y


  • Base Case: $25mm (BH has already received offers for Maxim for more than they paid for it)
  • Downside Case: After tax loss of $10-20mm
  • Upside Case: $100mm+


  • Largest general interest men’s magazine
  • Strong brand -$100s of millions have been spent advertising the brand over the years
  • BH bought the brand for $10-15mm after the prior owner had several deals fall apart in the $25-28mm range
  • The business previously traded hands in 2007 for $250mm
  • Still losing money, and outcome is uncertain, but risk-reward is skewed very positive
  • Range of outcomes perhaps loss of $10-20mm to gain of $100mm+

See full PDF below.