tampabay.com

OSI suitors finally served

A change in voting helps avoid a fourth defeat of the $3.2-billion buyout of the Outback parent.

By Scott Barancik
Published June 6, 2007


TAMPA -- After three rejections by shareholders in the past month, OSI Restaurant Partners finally got permission Tuesday to accept a $3.2-billion buyout offer -- but just barely.

The Tampa parent of Outback Steakhouse and seven other chains said it received "yes" votes from shareholders representing about 51 percent of all stock held by noninsiders. OSI needed "yes" votes for a simple majority of such shares, or 50 percent plus one, in order to proceed with its $41.15-per-share deal.

What saved OSI from a fourth straight rejection was an agreement late last month to reduce by 4.4-million the number of "yes" shares it would need to declare victory. If not for that change, Tuesday's vote again would have fallen millions short even though the buyers had increased their offer price from $40 per share.

Celebrations were muted Tuesday morning at the shareholder meeting in Tampa. None of the six independent OSI directors who green-lighted the management-led buyout in November showed up. Only about a dozen stockholders and four OSI officials -- chairman Chris Sullivan, vice chairman Bob Basham, chief executive Bill Allen and general counsel Joe Kadow -- attended.

Asked to comment on the vote after the meeting, Sullivan stopped, chuckled and walked away.

Nevertheless, Tuesday's vote was historic. In approving the deal, OSI shareholders eliminated what may be the last major obstacle preventing the Tampa Bay area's best-known international brand, Outback Steakhouse, from going private. The company expects to close its deal with the acquirers -- a group that includes private-equity firms Bain Capital Partners and Catterton Management, and company insiders like Sullivan and Basham -- by June 19. OSI's stock price rose 14 cents per share Tuesday to close at $41.

David Vaurio of New Port Richey didn't bother waiting for the deal to close. The part-time U.S. Navy officer sold his OSI shares shortly after its going-private deal was announced in November. "When insiders are sitting on both sides of a transaction, it's not clear you can trust either side," he said.

Although going private will relieve company officials of certain headaches associated with Wall Street, such as meeting its aggressive growth expectations, it won't solve the problem of Outback Steakhouse's declining same-store sales. Bryan Elliott, a restaurant analyst at St. Petersburg's Raymond James & Associates, said OSI's new owners will have to spend lots of time and a great deal more money to revitalize the 18-year-old chain's cachet and market share in an era of heightened competition. "There's not a quick-and-easy fix here," he said.

Tuesday's vote will likely mean an end to two shareholder lawsuits concerning the buyout deal. Both were settled in March, but could not go forward until shareholders approved it.

"Was it a perfect merger agreement? No," said Paul Geller, whose Boca Raton law firm filed one of the two suits. "But I'm certain that Bain paid more than they ever thought they would ... and I also know that the shareholders were given far more information than either Bain or OSI's management thought the shareholders needed to get."

Scott Barancik can be reached at barancik@sptimes.com or (727) 893-8751.

WHAT OUTBACK EXECUTIVES WILL RECEIVE:
Bob Basham,
co-founder, vice chairman
Chris Sullivan,
co-founder, vice chairman
Tim Gannon,
co-founder
Bill Allen,
chief executive
Year joined: 1987
Merger payout:
$176-million
Year joined: 1987
Merger payout:
$101-million
Year joined: 1987
Merger payout:
$48-million
Year joined: 2005
Merger payout:
$30-million
Source: Company filings. Payout includes cash and stock received in exchange for existing OSI shares, cash for existing stock options, restricted stock in parent company, deferred compensation and annual management fee