Outback Steakhouse is selling majority ownership in its Brazilian business for roughly $243 million to new franchise operator Vinci Partners.
The Brazil-based asset management firm will obtain 67 percent ownership while Outback parent Bloomin’ Brands will retain 33 percent. Bloomin’ CEO Mike Spanos said the transaction will help the steakhouse focus on domestic operations.
“It has been my experience living and working internationally with franchise partners that combining powerful classic brands with local capability and expertise is the optimal business model to maximize future growth,” Spanos said during the company’s Q3 earnings call. “We have also created aligned economic interest for both parties with a material equity stake to grow the business and to grow it in a profitable way.”
The transaction is expected to close this year. Bloomin’ will receive 52 percent of the proceeds upon closing and the remaining 48 percent in 2025. The company will provide greater detail on how it plans to use the proceeds during its Q4 earnings call in February.
The company has the option to sell its remaining 33 percent ownership interest in 2028.
“We certainly expect that business to continue to grow,” said CFO Michael Healy. “We’ve chosen the right partner, right, to really lead and grow that business and augment it with talent and capability. … Obviously, we love that business. We’re really excited about it but it allows us to focus on our core domestic. And we have a great partner down there that can focus 100 percent of their time on growing that business. So economics were good for us. We’re able to benefit in the growth. And so it was a great opportunity for us.”
Outback’s Brazilian segment saw comps drop 3.6 percent in Q3. The chain opened seven stores during the quarter, boosting the country’s footprint to 172 units. Around $40 million in capital expenditures has been put toward these locations over the past 12 months. Bloomin’ previously projected the Brazilian market to reach 300 units by the end of 2028.
Outback has been in the country since 1997 when it debuted in Rio de Janeiro.
The company indicated in May that it was exploring strategic options around the Brazilian restaurant fleet. But this wasn’t the first time.
Before COVID, Outback was seriously exploring the sale of its restaurants in Brazil. During the Q4 2019 earnings call in February 2020, former CEO David Deno noted, “One area within our portfolio that has received significant interest is our business in Brazil.” He emphasized Bloomin’ was not obligated to sell but was engaged in ongoing discussions with interested parties. In early 2020, Brazilian newspaper Valor Economico reported the company had shortlisted three bidders, with the Outback business estimated to be worth around $472 million.
Brazil was among the countries hit hardest by the COVID pandemic, which significantly impacted the restaurant sector. Comparable sales fell by 31.4 percent year-over-year in 2020. However, the stores bounced back over time, with same-store sales rising 28.7 percent in 2021 and 38.3 percent in 2022.
The transaction comes about two and a half months after Spanos took over as CEO. Leading up to the switch, Bloomin’ had been pressured by activist Starboard Value to implement operational changes. One of the bigger pieces of advice was for Bloomin’ to build out Outback’s Brazilian business.
