Outback Steakhouse Parent Bloomin' Brands Looks Attractive With $11/Share IPO

| About: Bloomin' Brands (BLMN)

Outback Steakhouse parent company Bloomin' Brands (NASDAQ:BLMN) will test the public markets tomorrow with a planned initial public offering. The company will be selling 10.7 million shares, and existing shareholders will also be selling an additional 10.7 million shares. Shares were initially priced in the $13-15 range, but official pricing has been set at $11.

Bloomin' Brands consists of:

· Outback Steakhouse

669 company owned, 106 franchised in 49 states

111 company owned, 47 franchised international

Average check price: $20

· Carraba's Italian Grill

230 company owned, 1 franchised in 32 states

Average check: $21

· Bonefish Grill

151 company owned, 7 franchised in 28 states

Average check: $23

· Fleming's Prime Steakhouse and Wine Bar

64 company owned in 28 states

Average check: $68

· Roy's

22 locations owned in a 50% joint venture

Through its four core concepts and joint venture, Bloomin' Brands has 1,247 owned restaurants and an additional 195 franchised locations around the world. The company operates in 49 states and 21 additional countries.

Among its concepts, Outback Steakhouse is the number one steak restaurant chain in the United States. Carrraba's maintains the number two position in Italian restaurants in the United States, behind Darden Restaurants' (NYSE:DRI) Olive Garden. Similarly, Bonefish Grill has the number two market position inside the United States, behind Darden's Red Lobster. Fleming's is the fourth largest fine dining steak house in the United States. Through its international locations, Outback Steakhouse is the number one western concept full service restaurant in both Brazil and South Korea.

In 2009, Bloomin' Brands initiated a turnaround plan that included these key activities:

· Enhanced its brand/concept competitiveness

· Strengthened management team and organization capabilities

· Accelerated innovation

· Improved analytics and information flow

· Increased productivity and generated significant cost savings

· Invested in information technology infrastructure

The company's growth plans consist of:

· Growing comparable restaurant sales

· Pursuing new domestic and international development with strong unit level economics

· Driving margin improvement

Bloomin' Brands has plenty of room to grow its core concepts domestically and internationally. The company has made Bonefish Grill its number one domestic priority in 2012. The company plans to open 20 new Bonefish Grill restaurants in that time period. In fact, Bloomin' Brands believes it can double the number of Bonefish locations in the next five to seven years. Carraba's is also slated for strong growth, with 14-17 new store openings planned over the next two years. Internationally, Bloomin' Brands will work on expanding in existing locations like South Korea, Brazil, and Hong Kong. New areas for expansion include China, Mexico, and South America.

In the most recent quarter (ending 06/30), Bloomin' Brands saw revenue of $980.9 million, an increase from last year's $955.5 million in the same period. Net income came in at $17.5 million, up from $15.5 million last year. Comparable restaurant sales increased 2.4%, and positive growth occurred in all four core concepts:

· Outback Steakhouse: +2.3%

· Carraba's: +1.5%

· Bonefish Grill: +2.1%

· Fleming's: +6.8%

Annual revenue has increased from $3.6 billion in 2009 and 2010 to $3.8 billion in 2011. Net income grew from a loss of $64 million in 2009 to a profit of $53 million in 2010 and $100 million in 2011. Earnings per share were $0.94 in the most recent period ending fiscal 2011. The company posted a loss of $0.62 in 2009 and a profit of $0.50 in 2010.

From my perspective, the big negatives for the company are debt and ownership. At 1.8 billion, Bloomin' Brands has a large amount of debt. The company is addressing that in a small manner with its IPO. The proceeds are expected to be used to pay off senior notes that have a 10% interest rate.

After the offering, Bain Capital will own 51-54% of the outstanding shares. Additionally, Catterton will own 10.7-11.1% of Bloomin' Brands' shares. Within 180 days from the offering, over 96 million of outstanding shares will be available for sale after the lockup period. Another sale by insiders could send the share price down, however.

I think the new pricing bodes well for investors to get in on Bloomin' Brands. With earnings per share of $0.94, the company trades at 11.7 times trailing earnings at $11 a share. Earnings per share should shoot higher in fiscal 2012 with increased locations and comparable sales. Keep an eye on this restaurant IPO tomorrow and over the next few weeks.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.