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Private-equity bidders sweeten offer for Outback's parent

TAMPA Fla. The private-equity suitors attempting to buy Outback Steakhouse parent OSI Restaurant Partners Inc. sweetened their offer Tuesday morning to $41.15 per share, from the original $40, hoping to sway public shareholders who have held out on approving the deal. Their refusal has twice forced OSI to postpone a vote on the buyout.

Just hours prior to today's scheduled start time of OSI's special shareholder meeting, the would-be buyers Bain Capital Partners LLC and Catterton Management Co. LLC upped their cash buyout offer by 2.9 percent and the OSI board unanimously approved it, OSI said in a statement.

The deal is now valued near $3.6 billion, based on the outstanding share count, options to purchase shares and deferred compensation units outlined in OSI proxy materials. It was previously valued at $3.2 billion.

As a further concession, OSI's founders - Chris T. Sullivan, current chairman, Robert D. Basham, current vice chairman and J. Timothy Gannon, director emeritus - have agreed to receive the original $40 per share for their stakes in OSI. The amended buyout agreement still calls for OSI founders and certain members of its management to exchange their shares in OSI stock for shares in the new entity, which is called Kangaroo Holdings Inc.

Observers and analysts have already begun to question whether the sweetened offer would indeed be enough to move the deal forward, or whether shareholders would see this as the first in a series of escalating bids. Recent private-equity buyouts required two or three increases in the offered price before shareholders tendered their approval.

Ashareholder vote on the new proposal has been scheduled for June 5. Shareholders were originally scheduled to vote on the buyout on May 8.

According to a report in the Wall Street Journal, one of OSI’s largest institutional investors said shareholders opposed to the earlier offers would not be persuaded to give a thumbs-up because of $1.15-per-share increase. The investor, who wasn't identified, said his firm would continue to oppose the deal.

Yet, securities analyst Larry Miller at RBC Capital Markets said in a research note to clients that the increase "could be sufficient to get this deal done."

The agreement between OSI and its pending buyers requires a majority vote to move forward. Shareholders that do not cast a vote are counted as "no" votes, and the votes of OSI's founders and management participating in the deal do not count toward the majority, according to OSI's proxy materials.

Last month OSI reported a 14.3-percent slide in first-quarter profit from a year earlier, to $27.6 million, or 36 cents per share, partly on costs related to the planned buyout. Total revenues for the quarter ended March 31 rose 7.5 percent to $1.1 billion. The company's current market capitalization is about $3.1 billion.

OSI operates or franchises 1,440 restaurants under nine brands include Outback, Carrabba's Italian Grill and Bonefish Grill.

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