El Pollo Loco is making a point to stave off controversial investor Sardar Biglari.
On Tuesday, the fast casual announced that its board unanimously adopted a limited-duration shareholder rights plan. The strategy, otherwise known as a "poison pill," is meant to prevent company takeovers and the accumulation of more stock by one investor.
The move was in response to Biglari Capital Corp. (parent of Steak 'n Shake) acquiring 9.1 percent of outstanding shares on July 28 and increasing it to more than 11.3 percent as of August 8. After taking into account share repurchases, it's more than 12 percent.
El Pollo's board recognized Biglari Capital as a company that has a "track record of acquiring substantial and sometimes controlling interests in public restaurant companies."
“El Pollo Loco’s Board is committed to protecting our shareholders,” Chair William R. Floyd said in a statement. “The adoption of this Rights Plan is intended to ensure that shareholders are able to realize the full potential of their investment in the Company and to prevent any third party from obtaining control of El Pollo Loco in a manner and at a price that are not in the best interests of the Company’s shareholders.”
As part of El Pollo Loco's rights plan, if Biglari or any other person acquires 12.5 percent or more of the company's outstanding stock, all other stockholders would be able to acquire shares at a 50 percent discount, which would dilute the person's stake.
Most recently, Biglari spent years engaging in proxy fights with Cracker Barrel. The back and forth ended in 2022 when the casual-dining chain announced a Nomination and Cooperation Agreement in which it expanded the board to 11 members and appointed Jody Bilney, one of Biglari's nominees. Beforehand, Biglari heavily criticized Cracker Barrel leadership and questioned the capability of CEO Sandy Cochran by stating she was "CEO of Books-A-Million, a failed bookstore enterprise, before joining Cracker Barrel in 2009.” He also slammed the brand's investment in Punch Bowl Social as "one of the worst business blunders in the annals of restaurant history."
El Pollo Loco's systemwide same-store sales were down 3.4 percent in Q2, including a 4.1 percent decrease at franchise restaurants and a 2.3 percent decrease at company-operated restaurants, which also saw a 4.5 percent decline in transactions. CEO Larry Roberts attributed the lower-than-expected sales to the lapping of last year’s successful Shredded Beef Birria promotion.