Activist Targets Outback Steakhouse. Is a Sale Next?

Shares of Bloomin’ Brands skyrocketed more than 12 percent Monday afternoon when activist hedge fund Jana Partners announced an 8.7 percent stake in the casual dining company. Notably, the fund revealed in a securities filling under “Purpose of Transaction” that, with the assistance of the other reporting persons, it intends to have discussions with Bloomin’s board of directors and management regarding topics, including “a review of strategic alternatives including exploring a sale” of the company.

Jana has been making waves lately in the restaurant industry. It disclosed last week a 4.5 percent, $134 million stake in quick-service brand Jack in the Box. That news sent shares jumping as well. Jana is also the fund that took a stake in Whole Foods Market earlier in the year. In that case, like Bloomin’, Jana pushed Whole Foods to explore strategic alternatives. On June 16, Amazon sent a shock wave through foodservice with its $13.7 billion purchase of the supermarket behemoth.

Does a similar fate away Bloomin’, the parent company of Outback Steakhouse, Carrabba’s. Bonefish Grill, and Fleming’s Prime Steakhouse and Wine Bar?

Jana said in the filing that it believes shares are undervalued and “represent an attractive investment opportunity.” They were trading at $17.92 before the news broke.

Other than selling Bloomin’, strategic alternatives Jana expects to investigate include: “portfolio composition; operating performance and cost management; capital allocation; board composition; and governance”

With the move, which took hold November 10, Jana is now the second-largest outside shareholder of Bloomin’. 

Jana said it could take other steps to increase shareholder value. It won’t, however, acquire a control stake, or group with any other party to do so. It won’t engage in an “extraordinary transaction” such as a merger, or acquire a material amount of the company’s assets.

Jana purchased 7,980,480 shares for an aggregate purchase price of about $137.1 million.

Outback reported its first quarter of improved traffic since 2016 in November when it posted an increase of 0.1 percent in Q3. Same-store sales were up 0.6 percent at the chain. They were down at Bloomin’s other brands: Carrabba’s fell 2.8 percent; Bonefish 4.3 percent; and Fleming’s 1 percent. Bloomin’ credited 1 percent of Outback’s decrease to hurricanes Harvey and Irma.