Starboard Value L.P., the activist investor, offered more details on its interest in Outback Steakhouse parent Bloomin’ Brands Inc. in presentations posted to its website last week.
The New York City-based activist investor, which had taken successfully turned its attention to Papa John’s International Inc. and Olive Garden parent Darden Restaurants Inc., in August had filed Securities and Exchange Commission documents that revealed it had taken a more than 9.9%-share stake in the Tampa, Fla.-based casual-dining operator. In September, it also added David George, who retired in 2020 as chief operating officer at Orlando, Fla.-based Darden Restaurants Inc. and had served as president of its Olive Garden and LongHorn Steakhouse divisions, as an adviser.
Also in September, Bloomin’ made changes in its board, naming Michael Mohan, a former president and chief operating officer of Best Buy, as chairman, and adding Rohit Lal, executive vice president and chief information officer of trucking company Saia. The company highlighted each of the executives’ digital bona fides.
Starboard, in its presentation that included updating its stake in Algonquin Power & Utilities Corp., said, “Outback, Bloomin’s largest concept, is our top focus for operational improvement and value creation.”
Comparing the brand to Texas Roadhouse and Darden’s LongHorn Steakhouse, Starboard said “Improving execution in the restaurants and creating a better customer experience are critical for the value creation opportunity at Bloomin’.”
Starboard, which noted in filings that former Darden executive George held 1,196 shares of Bloomin’ Brands, said, “Starboard seeks to leverage its experience turning around Olive Garden in improving operational execution at Outback”
Starboard also said it saw opportunities for the company to address marketing for the Outback Steakhouse brand.
“Outback’s branding must re-embrace fun,” it said. “Older commercials featured cowboys, explorers, surfers, musicians, football, and the outdoors – showcasing the fun in the Outback concept.”
Growth levers for Bloomin Brands, Starboard said, including Outback Brazil, Fleming’s Prime Steakhouse and Wine Bar, Carrabba’s Italian Grill and Bonefish Grill.
Starboard said Outback Brazil has positioned the restaurant as a celebratory occasion spot. “With 25 years of operating history, Outback is the casual-dining steakhouse category leader in Brazil that warrants a premium, not a discount.”
And Carrabba’s, the Italian concept, has 199 company-owned units and Darden had 906 Olive Gardens as of Aug. 27, the presentation noted. “There is extensive white space in the casual-dining Italian space for Carrabba’s, a concept with 37 years of operating history, to grow into the clear No. 2.” As of June 25, Carrabba’s had a total of 218 restaurants, with 19 of those franchised.
Starboard also noted opportunities in capital allocation, especially for new restaurants and their return on investment.
‘Bloomin generates a quarter of its market cap per year in discretionary cash flow,” Starboard noted. “Between capex across brands, a dividend, and buybacks, there is significant potential for capital allocation optimization to drive shareholder value.”
Bloomin’ Brands ended its second quarter on June 25 with 1,475 restaurants, including 689 Outbacks in the United States, 218 Carrabba’s Italian Grills, 175 Bonefish Grills, 64 Fleming’s and seven fast-casual Aussie Grills. International restaurants include 148 Outbacks in Brazil and 92 in South Korea.
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