Starboard Value’s challenge to Bloomin’ Brands is over after the company appointed two of the activist’s representatives to its board of directors.
The Outback parent announced Wednesday that former Darden COO Dave George and Starboard partner Jon Sagal now have a seat at the table, effective immediately. Not only that, but Bloomin’ agreed to form an Operating Committee that will work with management to identify and recommend opportunities for improvement. George will serve as the chair of that committee. Starboard hired George as an adviser last year. He worked at Darden for nearly 17 years, serving as COO from January 2018 to August 2020. Prior to that, he served as president of Longhorn Steakhouse for 10 years and as president of Olive Garden for five years.
Bloomin’ said the move was part of a cooperation deal entered between it and Starboard, which has a 9.7 percent stake in the business. The activist also agreed to customary standstill, voting, and other provisions.
“We are pleased to welcome Dave and Jon to the Board,” Bloomin’ chairman R. Michael Mohan said in a statement. “With more than 30 years of leadership experience in the restaurant industry, Dave is deeply familiar with the unique aspects of casual dining and has a proven record of driving growth and profitability. Jon brings valuable financial and investment acumen and further shareholder representation to the Board. We are confident Dave and Jon will further enhance our Board’s already diverse and proven expertise, and we look forward to benefiting from their perspectives as we advance our ongoing work to deliver a differentiated customer experience, drive sales and traffic and create value for all shareholders.”
It was revealed in August that Starboard bought shares into Bloomin’. The transaction raised eyebrows given the activist’s history with restaurants. Ten years ago, Starboard accomplished a significant feat by overhauling the entire board of directors at Darden due to its dissatisfaction with the company’s direction. Starboard proposed the idea of separating Red Lobster and Olive Garden into a distinct entity, but Darden rejected this suggestion, instead opting to sell the seafood chain to Golden Gate Capital for $2.1 billion. Prior to the board removal, Starboard presented a comprehensive plan aimed at boosting Darden’s financial performance, which included critiques of Olive Garden’s unlimited breadsticks and cooking methods. The hedge fund’s takeover ultimately resulted in a prolonged period of strong sales performance.
Starboard is also credited with steering Papa Johns back on course. In the early months of 2019, the hedge fund infused $250 million into the pizza chain and appointed Jeffrey Smith as the new chairman. This intervention came in the wake of a challenging period for Papa Johns when its founder and former CEO/chairman John Schnatter stepped down following an incident where he used offensive language during a conference call. Since Starboard’s investment, the company has witnessed remarkable growth, with its stock price and operating income more than doubling, and experiencing a surge in same-store sales during the pandemic.
The hedge fund eyed similar actions with Bloomin’. In October, Starboard released a presentation around its plan to spark a comeback for the Outback owner. The main bullet points were: operational improvement at Outback, re-embracing fun in advertising and promotional materials, leveraging opportunities at other concepts under the Bloomin’ banner, and recognizing Outback Brazil’s potential.
Smith, who serves as Starboard’s chief investment officer in addition to being CEO, said he “appreciated the collaborative and open dialogue” with the Bloomin’ Board of Directors.
“Bloomin’ Brands has a great portfolio of brands along with compelling growth levers and opportunities for value creation,” Smith said in a statement. “We believe Dave and Jon bring experience and insights that are additive to the Company’s Board, and we look forward to working closely with the Company to drive further operational and financial improvements and enhance value for shareholders.”
Bloomin’s combined U.S. traffic fell 4.7 percent in Q3. Traffic was down 6.1 percent at Outback, 5.7 percent at Bonefish Grill, 4.4 percent at Fleming’s Prime Steakhouse, and 0.1 percent at Carrabba’s Italian Grill. Combined U.S. comps slid 0.5 percent in the quarter and were down 1.1 percent at Outback, 0.5 percent at Bonefish, and 4.1 percent at Fleming’s. Carrabba’s bucked the trend and delivered a 3 percent same-store sales lift, driven by ongoing strength in takeout, delivery, and catering, which accounted for just over a third of the brand’s total sales.