Bain and Catterton Grab Outback for $3.2B

Target: OSI Restaurant Partner (NYSE: OSI)

Sponsors: Bain Capital Partners, Catterton Partners

Purchase price: $3.2 billion

Advisor: Target: Wachovia Securities; Target’s special committee: Wachovia Securities, Piper Jaffray

Legal counsel: Target: Baker & Hostetler; Target Special committee: Wachtell Lipton Rosen & Katz; Sponsors: Ropes & Gray

Buyout deals have now stretched all the way to the Australian Outback, or at least corporate America’s version of it.

Bain Capital and Catterton Partners have sealed a deal to buy Tampa, Fla.-based OSI Restaurant Partners (NYSE: OSI) for $40 per share, or approximately $3.2 billion, including $185 million in assumed debt. OSI is the parent company of the Outback Steakhouse restaurant chain and several other restaurant businesses.

A special committee of independent directors, though unanimously recommending that shareholders accept the deal, plans to conduct a “market test” for the next 50 days in which it will solicit competing bids. The company says it expects the transaction to close by the end of next April. OSI company founders Robert Basham, Timothy Gannon and Chris Sullivan are also part of the Bain and Catterton consortium.

The company’s best-known brands, Outback Steakhouse and Carrabba’s, have lost market share amid softer sales during the year. In response, investors had bid down the company’s shares to a 52-week low point of $27.39 per share in August, far from the $46.62 per share it traded at in late January. The offer price on the deal, announced on Nov. 6, represents a premium of 23% above OSI’s closing price on the Friday before the deal was announced.

Raymond James analysts rated OSI’s stock as “underperform” after the bid was made public and said there was an approximately 40% chance of there being a more generous competing bid. Raymond James put the company’s value at approximately $43.50 per share. Analysts with Oppenheimer titled their report “Take the Money and Run” and downgraded OSI’s stock to “sell,” saying that the risk-reward of waiting for the deal to be finalized outweighs the risk of other increased bids. The Oppenheimer report rated the Bain and Catterton bid value as fair and said it is doubtful that another significantly higher bid would be made.

The market has seen several restaurant LBOs recently. A little over two months ago, Catterton Partners and Oak Investment Partners agreed to buy restaurant chain Cheddar’s Inc. from Brazos Private Equity Partners in a secondary transaction, generating a return of about 4.5x invested capital and an IRR of roughly 80% (see Buyouts, Sep. 11, 2006). Catterton and Oak each took a 50% stake in the company. CBRL Group Inc. (Nasdaq: CBRL) has agreed to sell the Logan’s Roadhouse Inc. restaurant chain to Bruckmann Rosser Sherrill & Co. and Canyon Capital Advisors for $486 million (see Buyouts, Nov. 6, 2006). Logan’s Roadhouse had been in registration for a $350 million IPO. Lone Star Funds agreed to acquire Lone Star Steakhouse & Saloon Inc. (Nasdaq: STAR) for $27.10 per share (15% premium to Thursday’s closing price). The total deal is valued at over $600 million, and is expected to close in this quarter (see Buyouts, Sept. 11, 2006). OSI’s stock price jumped more than 20% on the news of the bid, from less than $31 per share to almost $40. The end of the week saw the price level off, closing at $39.37 per share on that Friday, Nov 10.—M.S.