Biglari Opens Activist Fund, Set To Ape Buffett

Jun 19 2007 | 1:38pm ET

Lion Fund founder Sardar Biglari, who made headlines for his much-publicized battle with Friendly Ice Cream Corp., is set to take another bite out of undervalued public companies with the recently launched Western Acquisitions fund.

“We want the fund to be an agent of positive change,” said Biglari, who serves as chairman of the board of restaurant chain Western Sizzlin, the parent of the fund’s management firm Western Investments.

“Western Sizzlin is interested in the way cash flows are allocated. At any firm, the culture permeates from the top and seeps down; the goal is to find good companies that are slightly mismanaged.”

Biglari, who likens Western Sizzlin to Warren Buffett’s Berkshire Hathaway, is planning to use the money raised for the new fund to diversify the company’s holdings, potentially outside of the food industry. “We admire Warren Buffett, and Berkshire used to be a textile company,” he said.
 
“Would Berkshire be what it is today if Buffett decided to stay in textiles? Western Sizzlin does not want to be the next Berkshire Hathaway. We want to learn from the best, like Buffett, and build Western Sizzling.”

In addition to acquiring equity stakes in public companies, the Western fund may also trade debt securities, options, warrants, futures, currencies, forward contracts, swaps and other derivative instruments, according to fund documents. It can also trade securities and other instruments on any domestic or foreign stock exchange and can also take and hold positions or trade in restricted private placement securities such as PIPES.

The new offering charges 1% for management and 20% for performance with a $500,000 minimum investment requirement for Class A shares and $1 million for Class B shares. Both share classes are identical, with the exception that Class A investors are subject to a two-year lock-up and Class B investors are locked in for five years. And Class B investors will be given partial protection against losses to the tune of 30% of cumulative net losses within the share class.

Cooley acknowledged that the protection comes at a cost, but said, “No cost is costly enough to provide comfort to investors.”


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