TAMPA Fla. Despite shareholder criticism and a delay of the vote for almost a month, Outback Steakhouse parent OSI Restaurant Partners Inc. won stockholders' approval today of a $3.2-billion buyout of the casual-dining giant by an investment consortium that includes the company's founders, certain members of management and two private-equity firms.
The approval came this morning at a special shareholder meeting, which had been postponed twice so that the buyers could solicit enough yea votes to make the deal happen. The vote was originally slated for May 8.
The company's suitors sweetened their offer on May 21 to $41.25 per share in cash, from $40. As part of that amended bid, OSI founders Chris Sullivan, Bob Basham and Tim Gannon agreed to accept $40 per share for their holdings. They did not vote on the deal, leaving the decision to outside investors. The founders will exchange their shares not sold for shares of the new Outback Steakhouse parent, Kangaroo Holdings Inc.
This morning's special shareholders meeting lasted approximately 10 minutes, just long enough to announce the voting results to a sparsely populated meeting room. The large room at Tampa's A la Carte Pavilion was appointed with probably a hundred chairs, yet few of them were taken. Reporters mingled around the front table following the results, but very few others remained to ask questions.
Shareholder Susan Sparks of Clearwater said she noticed there were more reporters at the meeting than shareholders.
Sparks said she and her mother were disappointed in the price they received for their 50 shares each. Sparks purchased the shares at a higher price than the $41.15 she will receive and said she thinks the shareholder sale could have been conducted more fairly.
Indeed, the deal had garnered criticism from some investors and analysts since it was first announced in November. Dissenters and other observers said the price was too low and the sale process, which did not include a public auction, favored OSI's founders and management.
Sparks' mother, Gisella Sparks, peppered OSI founder Chris Sullivan with questions as he walked to his car after the results of the shareholder vote were revealed: "Chris, I see the parking lots full and people waiting in line to get in your restaurants. What's wrong with the earnings? Why couldn't you get the stock price higher," she asked.
Sullivan responded that all casual-dining restaurant chains are suffering because of rising costs and other external factors. He said he and the new board would address those pressures and work to get OSI poised for the future. OSI's flagship Outback Steakhouse brand most recently reported a same-store sales decline of 1.4 percent for May, and has been recording negative sales and traffic trends for more than a year.
Sullivan also said that while the shareholder vote was very tight, he and his team are very pleased the deal was approved, and think it is the right time for the company to go private.
"If you look back to the mid-1990s, Brinker International and Darden Restaurants were kind of at the point where our concepts are at right now," Sullivan said. "We are getting ready, getting positioned, for the next 15 to 20 years É and that's when your stock gets hammered."
Indeed, the company's stock price has been as low as $27.30 per share within the past 52 weeks, and prior to the company's announcement of a buyout agreement.
Asked about speculation that the new board is planning to spin off OSI's developing concepts like Carrabba's Italian Grill, Bonefish Grill or Fleming's Prime Steakhouse & Wine Bar, Sullivan denied that a divesture is yet under discussion.
"We have no idea about a spin off," he said. "We haven't even had our first board meeting yet. We are very excited about the new team."
The new team includes investment funds associated with Bain Capital Partners LLC and Catterton Management Co. LLC, the largest equity holders in the new company. Bain has been an investor in Burger King and still holds stakes in Domino's and in Dunkin' Donuts parent Dunkin' Brands. Catterton has invested in P.F. Chang's, First Watch Restaurants and Cheddar's Restaurant Holdings Inc.
OSI's total system includes 1,457 restaurants under eight brands.
The deal is expected to close on or before June 19, the company said.
