The publicly traded restaurant space is offering investors more food for thought.
In light of Darden Restaurants' (DRI) recent play for Ruth's Hospitality Group (RUTH) , I've been seeing the more potential deal ideas come to the table. Shake Shack (SHAK) is, according to the The Wall Street Journal, seeing activist investor Engaged Capital turn up the heat in a proxy battle for three board seats. Last week, I wrote how Cracker Barrel (CBRL) is another potentially interesting target. Today, I will serve one more idea.
The name on the front-burner today is Bloomin' Brands (BLMN) . Bloomin' may not sound all that familiar, but I'd bet most investors would be aware of the company's brands. BLMN operates Outback Steakhouse, Bonefish Grill, Carrabba's Italian Grill, and Fleming's Prime Steakhouse & Wine Bar, in the casual, upscale casual, and fine dining segments. I've been to Bonefish, Carabba's, and Outback on several occasions, and have been impressed, most specifically by Bonefish.
BLMN went public back in 2012, and outside of a huge pandemic fall (to below $5 in March 2020), and subsequent recovery (to $32 in April 2021), shares have made little progress over the years, and trade at about the same level as they did 10 years ago. The company has stepped up its quarterly dividend, however, raising it 71% in February to 24 cents per share. That equates to a healthy 4.13% yield.
The draw for a potential acquirer is two-fold in my view. First, shares appear to be cheap at 7.4-times and 6.6-times 2024 and 2025 consensus earnings estimates respectively. In fact, it is the cheapest restaurant name currently available on that basis. That low valuations could be due in-part to the more upscale nature of some company brands in light of recession fears, in addition to debt levels, but is nonetheless cheap. Second is the potential power of the company's brands, which might look interesting to a bigger fish looking to expand its brand portfolio.
The company does have somewhat significant debt, which stood at $768 million as of the latest quarter end. Subtracting cash of $94 million, and adding current market cap of $2.03 billion puts the enterprise value at about $2.7 billion for the 1,507 location chain, which has a presence in 47 states and 13 countries.
As in Friday's piece on Cracker Barrel, I am not claiming that a bid for BLMN is imminent, but rather that the company possesses some characteristics that might make it attractive to an acquirer.
