Citing 'valuation disconnect,' Tampa-based Bloomin' Brands says it will consider a sale.
Is the bloom off the onion?
Speculation, again, surfaced recently that Bloomin’ Brands — Tampa-based parent company of Outback Steakhouse (home of the Bloomin’ Onion appetizer), Carrabba's Italian Grill, Bonefish Grill and Fleming's Prime Steakhouse and Wine Bar — could look to find a buyer.
“We are exploring potential strategic alternatives,” CEO David Deno states in the company’s Nov. 6 third-quarter earnings call, in standard Wall Street lingo for 'we might not want to, but pressure from outside forces might force us to sell the company, or parts of it.' “While we remain confident in our long-term strategy, we do not believe the company’s current market value appropriately reflects the company’s sales performance, strong record of cash-flow generation and intrinsic value.”
Deno cites “ongoing valuation disconnect” as reason to seek ways to maximize shareholder value with a sale. That could be directed toward some inpatient shareholders. A year ago, for one, Bloomin’ Brands took heat from one of its prominent investors, New York-based hedge fund Barington Capital Group, which chided the company for what it says was slow growth and low shareholder value. Barington recommended Bloomin’ focus solely on Outback, its top restaurant chain, and explore the sale of the other brands. Jana Partners, another fund with a big stake in the company, has also pushed for a sale or breakup.
Chatter about a sale belies Bloomin’ Brands' comeback in the tight margin, intensely competitive casual restaurant sector. The company has performed well in 2019, with revenue of $967.14 million in the third quarter, up slightly from $965.02 million in the same period last year. Earnings per share were also up in the third quarter and beat expectations. On the flip side, the company’s overall growth in share value continues to lag behind the S&P average by more than 5%.
While Deno, in the earnings call, didn't offer a timetable for a decision on the future of the company, Wall Street ate up the news of a possible sale, pushing the firm's stock up more than 10%, to $23.28 per share the day of the news.