Posted By: Tom Hustler
By Caroline HumerMon Nov 6, 12:08 PM ET
NEW YORK (Reuters) - OSI Restaurant Partners Inc. (NYSE:OSI - news),
owner of the Outback Steakhouse chain, said on Monday it plans
to go private in a $3.04 billion buyout that includes its
founders and the private equity firms Bain Capital Partners and
Catterton Partners.
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The company, which has seen its restaurant chains struggle
as the casual dining sector was hit by higher gasoline prices
that prompted customers to cut back on their spending, said it
would also consider better offers.
In addition, OSI disclosed more details of a previously
announced restatement, increasing the estimated size of its
liability for understated revenue.
The decision to accept the offer from the private equity
firms and company founders Chris Sullivan, Robert Basham and J.
Timothy Gannon, came after OSI hired Wachovia Securities in
April to study its options. It also follows pressure this
summer from activist fund Pirate Capital to break up the
company.
"While gasoline prices and home heating prices are better,
there are significant reasons to think that this down cycle
will continue for a period of time," OSI Chief Executive
Officer Bill Allen said in an interview.
Shareholders stand to get $40 per share, a 23.3 percent
premium over the closing price of $32.43 on Friday. The shares
rose 23.7 percent, or $7.67, to $40.10 in New York Stock
Exchange trading on Monday after rising as high as $40.50.
Investors are betting that another bidder, perhaps a
different private equity firm, may come forward, according to
one trader.
"With all the money that's currently around from private
investors and with a bid on the table from Bain Capital, the
expectations are that there's going to be at least some other
people looking at the deal," said Michael James, senior trader
at regional investment bank Wedbush Morgan in Los Angeles.
BRAND IMPROVEMENT SEEN
The company will need another 18 to 24 months to work on
improving its core brand, Allen said. OSI intends to follow
through on plans stated this summer to slow expansion to 100
restaurants in 2007, he said, and it will stick by its decision
to retain the restaurant chains that Pirate had pushed it to
spin off, including Carrabba's Italian Grill and Bonefish
Grill.
"It's a premium in excess of 23 percent," Allen said. "We
didn't have anything that really compared to this offer."
OSI Restaurant said its board approved the deal and
recommended it to shareholders, based on the unanimous approval
of a special committee of independent directors.
However, that committee and its advisers will solicit
superior proposals -- in what is known as a "go-shop" provision
-- from other parties in the next 50 days. Such provisions have
become standard as the number of management-led buyouts have
soared this year with the increase in funding available from
private equity firms.
Both private equity firms already have investments in the
restaurant sector, including Bain's investment in Domino's
Pizza Inc. (NYSE:DPZ - news), Burger King Corp. (NYSE:BKC - news) and Dunkin
Brands, the parent company of Dunkin Donuts.
Catterton was an investor in Baja Fresh and P.F. Changs
China Bistro Inc. and now backs the Starwood Hotels & Resorts
Worldwide Inc. (NYSE:HOT - news) restaurant venture with chef Jean-George
Vongerichten along with Cheddar's Holding Corp.
Including assumed debt, OSI Restaurant said the deal is
worth about $3.2 billion. The company expects the transaction
to close before the end of April.
RESTATEMENT
OSI said that it will restate results due to an error
related to its gift cards, and that previously issued financial
statements should no longer be relied upon.
The company had said in October it was delaying the release
of its third-quarter results because of the restatement, which
will correct a previously announced understatement in its
liability for unearned revenue on unredeemed gift cards.
In October, it said it had tentatively determined its
liability for unearned revenue for unredeemed gift cards and
certificates was understated by $20 million to $40 million.
It now expects to record an adjustment to its unearned
revenue liability of about $50 million to $70 million at
September 30.
(With reporting by Chelsea Emery in New York, Dilipp S. Nag
in Bangalore and Jessica Wohl in Chicago)
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