The Bloomin' Onion (Part III)

OSI Restaurant Partners, Inc., owner of the Outback Steakhouse and Cheeseburger in Paradise restaurant chains, today announced that it agreed to an increased offer from a consortium led by Bain Capital Partners, LLC and Catterton Management Company, LLC.  The buy-out group will now pay $41.15 per share in cash up from $40.00 per share.  OSI's founders who are part of the acquiring group have agreed to receive only $40 per share for their stakes.  Bloomberg reports that many shareholders are likely to still view the consideration as insufficient, but that analysts believe the raise should be enough to obtain necessary shareholder approval.

In connection with the new agreement, OSI today also postponed for the third time to May 25, 2007 its shareholder meeting to consider the proposal.  It was supposed to be held today.  I've blogged before about the perils of management-led buy-outs and the OSI one in particular (see here and here).  OSI's CEO, CFO, COO and Chief Legal Counsel as well as its founders are all participating in the buy-out and have exercised what appears to be inappropriate influence and activity in this transaction.  The postponement of the meeting for three times in order to make sure that the proposal has sufficient votes speaks to these issues.    

NB.  If the transaction were structured as a tender offer, the payment of differential consideration here to the OSI founders would not be permitted due to the requirements of the all-holders/best price rule.  This rule does not apply to mergers.  Hopefully, if the SEC ever decides to update its tender offer and merger rules for the modern age, it will end this no longer justified disparity by applying the rule to both structures or neither.  For more on this and other no longer jusitifed SEC merger/tender offer distinctions, see my soon to be published article, The SEC and the Failure of Federal Takeover Regulation.