TAMPA Fla. After several setbacks and speculation the deal might never close, OSI Restaurant Partners, Inc. today announced the completion of its $3.5 billion acquisition by an investor consortium. The group consists of private equity firms Bain Capital Partners LLC and Catterton Management Co. LLC, as well as company founders Chris Sullivan, Bob Basham and Tim Gannon and certain members of OSI management.
With the transaction complete, Bain Capital owns a majority interest in OSI, and Catterton Management and the company founders share a minority stake. The current OSI senior management team, led by chief executive Bill Allen and chief operating officer Paul Avery, will continue to operate the business, and has also acquired a minority stake, OSI said.
Even before shareholders okayed the buyout last week, the operator or franchisor of eight brands boasting 1,457 restaurants said that it would focus as a private company on a turnaround of its flagship concept, the 953-unit Outback chain. Management said it planned to slow unit growth of the chain while re-imaging restaurants and testing new menu formats aimed at a broader customer base.
The company also said it planned to continue developing its smaller brands. But John S. Glass, an analyst with CIBC World Markets, said in a published note just after the June 5 shareholder vote that he expects OSI to quickly sell some brands and reduce the new owners' equity investment. He said that the most likely sale would be the dinner-only Bonefish seafood chain, which boasts about 127 units and posted about $327 million in sales for 2006.
Glass projected that Bonefish could be sold for about $350 million. He also said Roy's, Carrabba's and even Fleming's could be put on the block.
OSI officials have dismissed such conjecture. Last November, when OSI first announced intentions to pursue a buyout, CEO Allen said the company planned to remain intact and that the private-equity owners approved of its strategic position.
Asked about that speculation at least week's meeting, Sullivan denied that a divesture is under discussion. "We have no idea about a spin-off," he said. "We haven't even had our first board meeting yet.
Under the terms of the transaction, most OSI stockholders received $41.15 per share in cash. Sullivan, Basham and Gannon agreed to take only $40 per share for their holdings.
The deal had garnered criticism from some investors and analysts since it was announced in November. Dissenters said the price was too low and the sale process favored OSI's founders and management. Bain, Catterton and the insiders' group were named as the would-be buyers without a public auction, though the suitors did pledge to seek other bidders. None were identified, and the consortium proceeded with the deal, though with some high-profile complications, including two lawsuits.
OSI scheduled a special shareholder meeting on the deal for May 8, with the investors invited to vote yea or nay on the buyout beforehand. Any vote not submitted was regarded as a thumbs-down on the deal. The low volume of ballots prompted OSI's board to delay the special meeting just hours before it was set to begin, and to delay it a second time just a week later. It was finally held last week, where the deal was approved.
"We believe that our restaurant concepts are better positioned to focus on opportunities and to execute our business initiatives as a private company," Allen said in a statement announcing that the buyout had been completed. "With the support and loyalty of our partners we are confident we can accomplish our objectives."
