The Steak N Shake Co.'s Announcement This Morning That It Plans To Purchase Western Sizzlin Corp.

The Steak n Shake Co.'s announcement this morning that it plans to purchase Western Sizzlin Corp. for about $23 million puts the Indianapolis restaurant company back in the steakhouse business for the first time since exiting it nearly a decade ago.

In 2000, the company � then known as Consolidated Products Inc. � sold off its 11 Colorado Steakhouses in order to focus on its core Steak n Shake business.

But the company's strategy has shifted dramatically since Texas hedge fund manager Sardar Biglari took the helm last year. Biglari, 31, serves as president and CEO of both Steak n Shake and Western Sizzlin, a Roanoke, Va.-based franchiser of budget steak restaurants.

In an announcement this morning, Steak n Shake said it has signed a letter of intent for the acquisition. Both companies said terms were negotiated between special board committees made up entirely of independent directors.

Western Sizzlin already was a major Steak n Shake stockholder, with more than 1.5 million shares, according to a regulatory filing. Under the deal, that stock would be transferred directly to Western Sizzlin shareholders. Steak n Shake also plans to issue Western Sizzlin shareholder bonds paying 14 percent interest for five years. The Indianapolis company has the right to pay off the bonds after one year without penalty.

The joint statement did not elaborate on the strategy behind the acquisition, and Steak n Shake officials did not respond to requests for comment before IBJ Daily's deadline.

Steak n Shake is the far larger company, with a stock market value of $320 million and 486 restaurants. Most Steak n Shake restaurants are company-owned and none are farther west than Texas. Western Sizzlin has about 100 restaurants, nearly all franchised. They're in the Midwest, East, South and in California.

Neither company's stock moved dramatically after the announcement. Steak n Shake shares late this morning were fetching $10.98, down 1.7 percent on the day. Western Sizzlin shares were trading at $13, up 1.96 percent.

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