In a significant move to expand its presence in the casual dining segment, Darden Restaurants, the parent company of Olive Garden, has agreed to acquire Chuy’s Holdings, the popular Tex-Mex chain, in a $605 million deal.
The acquisition is expected to strengthen Darden’s portfolio of brands, which already includes LongHorn Steakhouse, Cheddar’s Scratch Kitchen, and Yard House, among others. Chuy’s, founded in 1982, operates over 90 locations across the United States and is known for its flavorful Tex-Mex dishes and eclectic, eclectic atmosphere.
Under the terms of the agreement, Darden will acquire all of Chuy’s outstanding shares of common stock for $17.24 per share, representing a premium of 10% over the company’s closing stock price on July 22nd. The deal is expected to close in the fourth quarter of fiscal 2022, subject to customary regulatory approvals and other closing conditions.
“This acquisition is a natural fit for Darden, as we continue to execute our strategy of building a portfolio of strong, well-positioned brands that offer unique and high-quality dining experiences,” said gene Lee, Darden’s CEO. “Chuy’s has a dedicated customer base and a loyal following, and we believe our resources and expertise will help accelerate the company’s growth and expansion.”
Chuy’s co-founder and CEO, Mike Rypka, who will remain with the company for a period of time to ensure a smooth transition, expressed excitement about the deal. “We are thrilled to be joining the Darden family, and we believe that our culture and values align perfectly. We look forward to leveraging Darden’s resources and expertise to take our brand to new heights.”
The acquisition is expected to be accretive to Darden’s earnings per share in the first year after the close of the deal, with cost savings of $15 million to $20 million anticipated by the end of the second year. The merger is also expected to result in the elimination of 50-75 positions at Chuy’s headquarters, which will be absorbed by Darden’s existing operations.
The deal marks the latest in a string of acquisitions for Darden, which has been actively expanding its portfolio through strategic buys and partnerships. The company has previously acquired Cheddar’s Scratch Kitchen, Yard House, and Eddie V’s Prime Seafood, among others, as part of its efforts to diversify its offerings and increase its scale.
In a statement, analysts at Jefferies Financial Group noted that the acquisition “marks a significant step in Darden’s efforts to build a more comprehensive portfolio of off-price casual dining brands.” They added that the deal is expected to benefit Darden’s shareholders by providing a new growth platform, diversifying its revenue streams, and enhancing its presence in the attractive Tex-Mex segment.
The acquisition is expected to have a significant impact on the casual dining industry, as Chuy’s will become part of the second-largest restaurant company in the United States, behind only McDonald’s. The deal is also expected to drive competition and innovation in the fast-casual segment, as other chains look to respond to the acquisition and expand their own offerings.
Olive Garden Parent Darden Agrees To Buy Chuy’s In $605M Deal
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