Activist investor Jana Partners confirmed a stake in Outback Steakhouse parent company Bloomin' Brands Inc BLMN which increases the likelihood the restaurant company will sell itself for at least $25 per share, according to BMO.
The Analyst
BMO Capital Markets analyst Andrew Strelzik upgraded Bloomin' Brands from Underperform to Market Perform with a price target lifted from $17 to $19.
The Thesis
Jana Partners' 9% activist stake in Bloomin' Brands increases the likelihood some sort of strategic action will take place, Strelzik wrote in the upgrade note. The company can sell itself at $25 to $30 per share which implies a forward 12-month EBITDA multiple of eight to nine times. It would be surprising if a deal takes place below $25 per share as this is where the stock traded at in April 2018.
Bloomin' Brands can also sell one or some of its chains and divesting Carrabba's, Bonefish, or Fleming's. This would streamline the remaining restaurant chains and value the remaining company at $18 to $20 per share.
Other strategic alternatives Bloomin' Brands can consider include focusing more on high returning projects as returns on capex spending aren't evident in EBITDA metrics over the past five years, or allocate a larger share of cash flow from operations to investors.
Bottom line, the likelihood investors can see strategic action in the near-term is difficult to quantity it is now more likely to take place today than prior to Jana Partners' involvement.
Price Action
Shares of Bloomin' Brands were trading higher by 1.98% Thursday at $19.04.
Related Link
MKM: Bloomin' Brands Optimism May Increase With This Activist Investor Taking A Stake
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