Outback Steakhouse parent company, Bloomin’ Brands, has become a target for activist investor Starboard Value. In a recent regulatory filing, Starboard disclosed a 9.9% stake in Bloomin’ Brands (BLMN), stating that the shares were undervalued. Despite providing little further information, Starboard’s CEO, Jeff Smith, hinted at the potential of the restaurant industry in an interview with CNBC.
This is not the first time that Bloomin’ Brands has faced activist pressure. Over the years, both Jana Partners and Barington Capital have targeted the company. However, this recent development seems to have positively impacted Bloomin’ Brands’ stock. Following the news, shares rose by 7%, and they have experienced a 36% increase in value so far this year.
Despite this, Bloomin’ Brands’ stock appears to be undervalued. With a forward price-to-earnings ratio of just 8.8, it is significantly lower than its five-year average of 12.9. In comparison, Darden Restaurants, the parent company of Olive Garden and a previous target of Starboard, currently trades at a forward P/E ratio of 17.7.
Starboard has a strong history in the restaurant industry. The investor gained control of Darden’s board after noting issues with Olive Garden’s pasta water lacking salt. Additionally, Starboard’s CEO, Jeff Smith, served as the chairman of Papa John’s International until earlier this year.
Overall, Bloomin’ Brands must now consider the viewpoints of its shareholders as it works to drive shareholder value in the face of increased activist pressure.
