Bailing Out on Shareholders!

The Peanuts cartoons of the 60’s used to tickle me in thought provoking ways when the football season came because I wondered why Charlie Brown put up with all the indignities of having the ball pulled away when he went to kick it and then always taking the brunt of Lucy’s brutality. Why didn’t he just find a more compatible group of friends or take his football and go home… I guess he did the latter eventually didn’t he?

Similarly, we have companies like the Outback Steakhouse (OSI) who have conjured up another way of leaving the shareholder interests in the distance and move the insider’s interests front and center. It appears that they have taken a page from Charlie Brown and want to take their ball and go home. They just announced this week that there is a group of founders and insiders who want to take the company private because they have exhausted all the ways they can think of to enhance shareholder value.

This all started about a year ago when some of their long time management personnel found it outrageous to have to comply with Sarbanes Oxley and wanted to go in a different direction. Some of those officers resigned and went to work for a private equity firm that wanted to seek opportunities in that area of the marketplace.

This is rather an abomination to those of us who believe in the integrity of the marketplace in that it is some of the very same people who left the company who now are part of the group trying to take the company private to accomplish the goals that are seemingly impossible as a public company. If you mark your calendars about three (3) years from now, you will likely see an initial public offering (IPO) of many of the same assets that are currently known to us as the Outback Steakhouse and its adjoining properties. That’s assuming that the deal to take the company private gets done without a shareholder rebellion.

Why should we care about this? It’s just another deal and if capitalists can pull it off shouldn’t we be celebrating their efforts? The answer to that question is that if this company is attractive enough for insiders to do a leverage buyout to own it, it also could be operated effectively on behalf the current shareholders.

This is all part of the double dealing attitude that exists today in corporate board rooms that is inherent in the way management represents management first and the owners (shareholders) second. If you have not started to think about the concept of “corporate governance” as it relates to Biblically Responsible Investing, it is time to bring your Bible to Wall Street.

Sent November 13, 2006

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