SCHEDULE 13D/A: Biglari Entities Increase Stake in El Pollo Loco, Enter Confidentiality Agreement for Potential Transaction

Sardar Biglari and affiliated entities have increased their beneficial ownership in El Pollo Loco Holdings, Inc. to 15.1% and entered into a confidentiality agreement regarding a potential transaction.

Summary

• Sardar Biglari, along with Biglari Capital Corp., Lion Fund II, L.P., First Guard Insurance Company, Biglari Reinsurance Ltd., Biglari Insurance Group Inc., and Biglari Holdings Inc., collectively reported beneficial ownership of 4,489,247 shares of El Pollo Loco Holdings, Inc. Common Stock.
• Sardar Biglari's individual beneficial ownership represents 15.1% of the outstanding shares, while Biglari Capital Corp. and Lion Fund II, L.P. each hold 13.4%.
• The increase in percentage ownership by the Reporting Persons is solely attributed to a decrease in the number of El Pollo Loco's shares outstanding, which was reported as 29,777,207 shares as of February 28, 2025.
• On April 6, 2025, Biglari Holdings Inc. and Biglari Capital Corp. entered into a confidentiality agreement with El Pollo Loco Holdings, Inc. concerning their interest in a potential transaction with the Issuer.
• The confidentiality agreement includes a customary standstill provision that restricts the acquisition of additional shares and other activities, expiring 30 days prior to the director nomination deadline for El Pollo Loco's 2026 annual meeting of stockholders.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to the initiation of discussions for a 'potential transaction' with a significant shareholder, which could lead to value creation. However, the details of this transaction are unknown, and the standstill agreement introduces a temporary limitation.

Positives

• The entry into a confidentiality agreement suggests active engagement between a significant shareholder (Biglari) and the company, potentially leading to a strategic transaction that could unlock shareholder value.
• Biglari's increased percentage ownership, even if due to share count reduction, solidifies their position as a major stakeholder, potentially signaling confidence in the company's long-term prospects or a desire for strategic influence.

Negatives

• The standstill provision in the confidentiality agreement temporarily limits Biglari's ability to acquire additional shares or engage in certain activist behaviors, which could constrain immediate strategic maneuvers.

Risks

• The 'potential transaction' is not guaranteed to materialize, and its terms, if it does proceed, are currently unknown.
• The standstill agreement restricts Biglari's flexibility to increase its stake or exert further pressure on management for a defined period.

Future Outlook

The document indicates a forward-looking interest in a 'potential transaction' between Biglari Holdings/BCC and El Pollo Loco Holdings, Inc., suggesting possible strategic changes or corporate actions in the future. The standstill provision's expiry date also points to a future window for potential director nominations or further share acquisitions by Biglari.

Management Comments

• Sardar Biglari, Chairman and Chief Executive Officer of Biglari Capital Corp., signed the filing, indicating the entities' intent to engage in a potential transaction with El Pollo Loco Holdings, Inc.

Industry Context

El Pollo Loco operates in the competitive fast-casual restaurant sector. Biglari Holdings Inc. has a history of significant investments and ownership in the restaurant industry, notably with Steak 'n Shake. This filing suggests Biglari's continued strategic interest in the restaurant space, potentially aiming for consolidation, operational improvements, or a take-private transaction within the fast-casual segment.

Corporate Governance

Related Party Transactions

• A confidentiality agreement was entered into between Biglari Holdings Inc. and Biglari Capital Corp. (significant shareholders) and El Pollo Loco Holdings, Inc. (the Issuer), which can be considered a related party transaction given Biglari's substantial beneficial ownership.

Stakeholder Impact

• Shareholders: Potential for increased value if the 'potential transaction' is favorable, but also uncertainty regarding its outcome and terms.
• Management: Engaged in discussions with a major shareholder regarding a potential transaction, which could lead to strategic shifts or changes in control.

Next Steps

• Negotiations or discussions regarding the 'potential transaction' between Biglari Holdings/BCC and El Pollo Loco Holdings, Inc. are expected to continue.
• The standstill provision will remain in effect until 30 days prior to the director nomination deadline for El Pollo Loco's 2026 annual meeting of stockholders, after which Biglari may have more flexibility in its actions.

Key Dates

Keywords

El Pollo Loco Holdings, Biglari, Sardar Biglari, Schedule 13D, beneficial ownership, confidentiality agreement, potential transaction, standstill agreement, restaurant industry, fast casual, corporate governance