UPDATE 2-Biglari agrees to $850,000 fine on Cracker Barrel buy

Tue Sep 25, 2012 2:02pm EDT

* Biglari in takeover battle for Cracker Barrel

* Biglari does not admit wrongdoing

* Biglari had 17.5 percent of Cracker Barrel in early Sept

WASHINGTON, Sept 25 (Reuters) - Biglari Holdings Inc, run by activist investor Sardar Biglari, will pay a $850,000 penalty to settle charges it violated merger reporting rules when it bought shares of Cracker Barrel Old Country Store Inc , the U.S. Justice Department said on Tuesday.

A proposed settlement between the company, which owns Steak 'n Shake and Western Sizzlin restaurants, and the government was filed in federal court in Washington, the government said. The Justice Department filed the complaint on behalf of the Federal Trade Commission.

Cracker Barrel is in the midst of a takeover struggle with Biglari, who last year wrote to Cracker Barrel stockholders, saying the company had failed to live up to its potential under the present board. Biglari Holdings had a 17.5 percent stake in Cracker Barrel as of early September.

The FTC said in the government's complaint that Biglari owned 100 shares of Cracker Barrel on May 23, 2011, and acquired more shares in late May to mid-June until it held more than $66 million worth of Cracker Barrel shares.

Biglari disclosed the purchase to the Securities and Exchange Commission but did not file with the FTC, which works with the Justice Department to enforce antitrust law, the complaint said.

Under U.S. law, stock purchases over a certain size must be reported to antitrust regulators to ensure they comply with antitrust law. Exceptions are made for passive investments, and the FTC argued that Biglari intended to be an active investor.

The FTC said in its complaint that Biglari telephoned Cracker Barrel's chief executive in late June 2011 and said that he had ideas to improve Cracker Barrel's business and asked that he and another Biglari associate be named to Cracker Barrel's board of directors. Cracker Barrel declined.

In the settlement, Biglari Holdings did not admit liability.

In April, Cracker Barrel adopted a poison pill to guard against Biglari's attempts to increase his stake.

The company noted the ongoing dispute in its reaction to the settlement, saying, "Our concerns about Mr. Biglari's intentions are underscored by the finding that Biglari Holdings violated the Hart-Scott-Rodino Act (regulating filings on share purchases) in connection with its acquisition of Cracker Barrel stock."

Biglari has indicated that he intends to nominate himself and an associate to the Cracker Barrel board at a Nov. 15 board meeting, Cracker Barrel said in early September.

Biglari Holdings did not respond to requests for comment.

In April, the company adopted a poison pill to guard against Biglari's attempts to increase his stake.

Cracker Barrel, which is based in Lebanon, Tennessee, runs country-themed restaurants and gift shops mostly along U.S. interstate highways.

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