Pushy hedge fund Pirate Capital was served a heaping helping of humiliation yesterday as it watched its former investment in the parent company of Outback Steakhouse skyrocket in value – a few months after it sold its massive stake.
OSI Restaurant Partners, the Tampa-based owner of Outback and other restaurant chains such as Carrabba’s Italian Grill, agreed yesterday to a Bain Capital-led $2.98 billion buyout.
The news sent OSI’s stock soaring nearly 23 percent, or $7.45, to close at $39.72.
For Pirate – which has earned stratospheric returns agitating for companies in its portfolio to be sold or split up – it was a bitter dish indeed.
The Norwalk, Conn.-based fund sold its 5.3 percent stake in mid-August after a pointed battle of words failed to convince OSI to find a buyer.
In one angry missive, Pirate general partner Thomas Hudson called OSI little more than an “undisciplined restaurant concept collector.”
Pirate’s stake in OSI was built when OSI shares were trading between $39 and $42 a share through July, according to Securities and Exchange Commission filings.
But in August, having failed to spur OSI management to spin off its units or find a buyer, the fund sold its stake at between $27.59 to $29.37 a share, locking in losses of $45 million to $50 million.
The drop in OSI’s stock price did help trigger a series of rapid changes – at Pirate Capital.
In September, four analysts and a portfolio manager left the $1.7 billion fund as its returns were up only 6 percent at the time, a sharp drop from its 24 percent annual returns since its 2002 inception.
Hudson announced that he was closing the flagship Jolly Roger fund and would no longer focus on asset growth.
More troubling, however, was a report that the SEC was investigating whether Pirate had promptly disclosed changes in its holdings.
A Pirate marketing executive declined to comment.