Darden Restaurants, Inc. (NYSE: DRI) and Chuy’s Holdings, Inc. (Nasdaq: CHUY) announced last week a definitive agreement in which Darden will 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, and more.
Expanding the Portfolio
Founded in Austin, Texas, in 1982, Chuy’s operates full-service restaurants known for their authentic, made-from-scratch Tex-Mex dishes. Each Chuy’s location is unique, embodying the brand’s 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 and averaging $4.5 million per restaurant annually.
“Chuy’s is a differentiated brand within the full-service dining industry with strong performance and growth potential,” said Darden President and CEO Rick Cardenas. “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.”
Strategic Fit and Financials
Darden will acquire Chuy’s at a 40% premium to its 60-day volume-weighted average price, with a purchase price representing a 10.3x multiple of Chuy’s Transaction Adjusted EBITDA for the twelve months ending March 31, 2024. Darden anticipates pre-tax net synergies of approximately $15 million by the end of fiscal 2026 and expects the transaction to be neutral to its diluted net earnings per share for fiscal 2025, excluding acquisition-related expenses, and accretive by 12 to 15 cents in fiscal 2027.
Steven Hislop, Chairman, CEO, and President of Chuy’s, stated, “We are excited about the opportunity to join the Darden family and its portfolio of well-respected brands. 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.”
Transaction Details
Under the merger agreement, Darden will acquire all outstanding shares of Chuy’s for $37.50 per share in cash. The merger agreement includes a 30-day “go-shop” period for Chuy’s to solicit alternative proposals from other interested parties. The transaction, which has been unanimously approved by the boards of directors of both companies, is expected to close in Darden’s fiscal second quarter, subject to customary closing conditions, including approval by Chuy’s stockholders and regulatory clearance.
Darden has sufficient liquidity to complete the transaction and expects to maintain a strong balance sheet post-acquisition, allowing for continued investment in new and existing restaurants and returning capital to shareholders through dividends and share repurchases.
Advisors and Next Steps
BofA Securities is acting as financial advisor and Hunton Andrews Kurth LLP as legal advisor to Darden. Piper Sandler is acting as financial advisor and Winston & Strawn LLP as legal advisor to Chuy’s.
An investor conference call to discuss the transaction is scheduled for July 18, 2024, at 10:00 am ET. Interested parties can access the live webcast or replay through Darden’s investor relations website.
For further information, please visit Darden’s website and Chuy’s website.
Texas Reporter 