When Starboard Value took a position in BLMN, we were short and covered our short. We will now deepen our thoughts into what might be possible with BLMN and present our findings on Friday, September 29th at 10 a.m. Other well-respected activists have taken a run at BLMN with little success. In summary, while it's uncertain what Starboard Value can accomplish that prior activists could not, their strong track record in the restaurant sector provides a reasonable basis for optimism. In our deck we will speculate on some ideas based on their past track record and other activist strategies:
EVENT DETAILS:
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Strength in the Restaurant Sector:
Starboard Value has a history of successful activism in the restaurant industry. Their prior engagements with Darden Restaurants (DRI) and Papa John's (PZZA) resulted in significant changes that benefited shareholders. This specialized experience may give them an edge in implementing more effective strategies for Bloomin' Brands.
Different Focus Areas:
Starboard could take an entirely different approach from the past activists by focusing on areas not previously emphasized. For example, they may look into technological upgrades, marketing shifts, or menu optimization to enhance shareholder value.
Leverage Past Failures:
Starboard can review the measures proposed or implemented by JANA and Barrington, analyzing why those strategies did not yield the desired outcomes. This analysis could lead to more refined proposals backed by understanding what hasn't worked in the past.
Strong Negotiation Tactics:
Starboard has been known for its assertive negotiation strategies, which might lead to more significant changes in board composition or corporate governance than previous efforts managed. To this end, we don't think the current management team is up to the task.
Fresh Eyes:
Being a new entity with a fresh perspective can sometimes lead to innovative solutions to longstanding problems. Starboard's fresh set of eyes might identify opportunities or solutions that previous activists overlooked. To that end, Starboard has enlisted the expertise of a restaurant operations specialist to aid in revitalizing the company. Starboard announced that it has engaged Dave George—a former COO of Darden Restaurants—as an advisor for its investment in Bloomin' Brands. With nearly 17 years at Darden, George has served as the president of Olive Garden and LongHorn Steakhouse before ascending to COO. He retired in 2020 and is widely recognized as an authority in operational management.
While we still have more work to do but here are our initial BLMN thesis points:
Although Starboard Values typically doesn't invest in companies for short-term gains, the current market cycle is unfavorable. The restaurant industry experienced a marked decline in customer traffic during August and September, casting doubt on the current cycle. Just last week, both BJRI, in a conference presentation, and DRI, during their earnings call, attempted to argue that the industry is reverting to traditional seasonal trends. However, the challenge currently facing BLMN is that its flagship Outback concept has witnessed a traffic drop—nearly 50% greater than the industry average.
