Darden Restaurants Inc., parent to such casual-dining chains as Olive Garden, LongHorn Steakhouse, and Cheddar’s Scratch Kitchen, has agreed to buy Chuy's Holdings Inc. in a $605 million deal, the company said Wednesday.
Orlando, Fla.-based Darden, which last acquired the fine-dining Ruth’s Chris Steak House a year ago, and Austin, Texas-based Chuy’s said the deal called for Darden to acquire all of the outstanding shares of Chuy's for $37.50 per share.
"Chuy's will complement Darden's portfolio of iconic brands, which currently includes Olive Garden, LongHorn Steakhouse, Yard House, Ruth's Chris Steak House, Cheddar's Scratch Kitchen, The Capital Grille, Seasons 52, Eddie V's, and Bahama Breeze,” Darden said.
Chuy’s, founded in Austin in 1982, owns and operates full-service restaurants with Tex-Mex-inspired dishes. As of June 16, Chuy’s had 101 restaurants in 15 states. In the last 12 months ending March 31, Chuy’s generated total revenues of more than $450 million, and average annual restaurant volumes of $4.5 million.
"Chuy's is a differentiated brand within the full-service dining industry with strong performance and growth potential," Rick Cardenas, Darden president and CEO, said in a statement.
"Based on our criteria for adding a brand to the Darden portfolio, we believe Chuy's is an excellent fit that supports our winning strategy,” Cardenas said. “I am excited to welcome their 7,400 team members to Darden and diversify the Darden portfolio into a new dining category."
Steven Hislop, Chuy’s chairman, CEO and president, added: "We are excited about the opportunity to join the Darden family and its portfolio of well-respected brands.”
Darden said the purchase price of $37.50 a share was about a 40% premium to the 60-day volume weighted average price.
The purchase price represents a 10.3-times implied multiple of Chuy's latest 12 months, ending March 31, of earnings before interest, taxes, depreciation, and amortization, Darden said.
The transaction is expected to close in Darden's fiscal second quarter.
BofA Securities acted as financial adviser and Hunton Andrews Kurth LLP acted as legal adviser to Darden. Piper Sandler acted as financial adviser and Winston & Strawn LLP acted as legal adviser to Chuy's.
For the fourth quarter ended May 26, Darden’s net income was $308.1 million, or $2.57 a share, down from $315.1 million, or $2.58 a share, in the same period a year ago. Sales were $2.957 billion compared with $2.769 billion in the prior-year quarter, reflecting the addition of 80 acquired company-owned Ruth’s Chris Steak Houses and 37 new restaurants.
Same-store sales for consolidated Darden were flat at 0% with declines of 1.5% at Olive Garden and increases of 4% at LongHorn Steakhouse. The fine-dining division had a decline of 2.6% and the other business fell 1.1%.
As of May 26, Darden had 2,031 restaurants, including 920 Olive Gardens, 575 LongHorns, 181 Cheddar’s Scratch Kitchens, 88 Yard Houses, 80 Ruth’s Chris steak houses, 66 Capital Grills, 44 Seasons 52s, 43 Bahama Breezes, 30 Eddie V’s, and four Capital Burgers.
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