Back when life was still "normal", and we were free to come and go as we pleased without fear of catching the virus, restaurant name Bloomin' Brands (BLMN) was in the midst of yet another bout with an activist investor. The parent of Outback Steakhouse, Bonefish Grill, Carabba's and Fleming's, has drawn the attention of Barington Capital, and Jana Partners in recent years, as each sought to drive value creation at BLMN, whose performance has been lackluster since it went public in 2012.
For its part, Barington was pushing BLMN to spin-off it's smaller brands (Bonefish Grill, Carabba's, Fleming's) from flagship brand Outback Steakhouse, which represents about 60% of revenue. Last Fall, Barington gave up on that idea and moved on, closing its position in BLMN.
Enter Jana Partners, which in February filed a 13D which indicated a 7.4% stake in BLMN, and its intention to nominate two names for the company's board of directors at the 2020 annual meeting, and one additional name if BLMN had three spots up for election. By March 10, Jana had increased its stake to 9.2%, owning 7.985 million shares at an average cost of $15.80. By that time, however, BLMN had fallen under $14, as a result of the coronavirus shutdown, just one week later, it briefly traded below $5. In late February, it was trading above $23.
This was Jana's second go-around as an activist with BLMN. It had also built up an 8.7% stake by late 2017, engaging the company, and ultimately settled when BLMN added an independent director to the board. Jana moved on, for a while that is, until rebuilding its stake and reengaging BLMN.
Jana's persistence has paid off -- not financially as BLMN closed last Thursday just above $9 -- but in terms of board seats. Last Thursday, Jana and BLMN announced a settlement, as two new directors, John Gainor (independent) and Jana's own Scott Osteld, were added to BLMN's board. The markets seemingly greeted the news favorably as BLMN rose 19% on Thursday, although it was generally a favorable day for the sector overall.
Now the difficult work begins as restaurants are mired in a shutdown the likes of which we've never seen. I could never have imagined BLMN shares falling below $5 as they did on March 20th, but this is uncharted territory. For it's part, BLMN has suspended it's dividend, along with several others, and is now faced with two big questions: when will it be able to reopen, and when it does, how quickly will the customers come back.
In the meantime, I expect that restaurant names will continue to trade like options -- the greater the leverage the more volatile they will be.