Darden Restaurants, Inc. (NYSE: DRI) and Chuy’s Holdings, Inc. (Nasdaq: CHUY) have jointly announced a definitive agreement for Darden to acquire all outstanding shares of Chuy’s for $37.50 per share in an all-cash transaction valued at approximately $605 million. This acquisition will add Chuy’s to Darden’s portfolio of iconic brands, which 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.
Founded in Austin, Texas, in 1982, Chuy’s operates full-service restaurants offering a distinct menu of authentic, made-from-scratch Tex-Mex dishes. Known for its eclectic and fun atmosphere, Chuy’s emphasizes a unique dining experience with its motto, “If you’ve seen one Chuy’s, you’ve seen one Chuy’s!” As of July 16, 2024, Chuy’s had 101 restaurants in 15 states, generating over $450 million in revenue in the last twelve months ending March 31, 2024, with average annual restaurant volumes of $4.5 million.
Rick Cardenas, Darden President and CEO, stated, “Chuy’s is a differentiated brand within the full-service dining industry with strong performance and growth potential. 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. I am excited to welcome their 7,400 team members to Darden and diversify the Darden portfolio into a new dining category.”
Steven Hislop, Chairman, CEO, and President of Chuy’s, expressed enthusiasm about joining Darden’s family of well-respected brands, stating, “Darden shares many of our same core values, particularly our operating philosophy and strong team member cultures. Together we will accelerate our business goals and bring our authentic, made-from-scratch Tex-Mex to more guests and communities.”
Highlights of the Transaction:
- Darden will acquire Chuy’s for $37.50 per share in cash, with a total transaction enterprise value of approximately $605 million, a 40% premium to the 60-day volume-weighted average price.
- The purchase price represents a 10.3x implied multiple of Chuy’s latest twelve months ending March 31, 2024 Transaction Adjusted EBITDA.
- Darden expects pre-tax net synergies of approximately $15 million by the end of fiscal 2026.
- Total acquisition and integration-related expenses are expected to be approximately $50 to $55 million, pre-tax.
- The transaction is expected to be neutral to Darden’s diluted net earnings per share for fiscal 2025, excluding acquisition and integration-related expenses, and accretive by approximately 12 to 15 cents in fiscal 2027.
- The transaction is expected to be completed in Darden’s fiscal second quarter, subject to customary closing conditions.
The transaction has been unanimously approved by the boards of directors of both Darden and Chuy’s. Under the terms of the merger agreement, Chuy’s board of directors unanimously approved the merger agreement with Darden and recommended that Chuy’s stockholders vote to adopt the merger agreement. The definitive merger agreement includes a 30-day “go-shop” period that will allow Chuy’s to solicit alternative proposals from interested parties.
Darden has sufficient liquidity to complete the all-cash transaction and expects to maintain a strong balance sheet and sufficient capital to achieve its capital allocation priorities, including maintaining existing restaurants, growing new restaurants, and returning capital to shareholders through dividends and strategic share repurchases.
The transaction is expected to close in Darden’s fiscal second quarter, subject to conditions set forth in the merger agreement, including approval by a majority of Chuy’s stockholders, expiration or termination of the applicable waiting period under the HSR Act, and other customary conditions.
