Darden Restaurants acquires Chuy’s Holdings for US$605M

USA – Multi-brand restaurant operator Darden Restaurants has completed the acquisition of restaurant chain Chuy’s Tex-Mex in a deal worth an enterprise value of US$605 million.

According to Darden Restaurants, the acquisition was partly financed from the proceeds of a US$400 million offering of 4.350% senior note bond type due in 2027. The acquisition was also partly financed from a US$350 million offering of 4.550% senior notes due in 2029.

The bonds were issued on October 3, 2024.

The acquisition was approved by Chuy’s Holdings’ stakeholders on October 10, despite being formally announced in July 2024.

Chuy’s Holdings’ stocks have been delisted on the Nasdaq after the acquisition’s announcement.

Piper Sandler and Winston & Strawn served as financial and legal advisors to Chuy’s Holdings. BofA Securities and Hunton Andrews Kurth offered the same services to Darden Restaurants.

The deal enhances Darden’s portfolio of restaurant brands, including LongHorn Steakhouse and Olive Garden.

The Tex-Mex restaurants operate more than 100 restaurants across 15 US states.

The company reported US$450 million in total revenues and an average restaurant volume of US$4.5 million in the year ending March 31, 2024.

According to the disclosed terms of the deal, the US$605 million enterprise value translates to US$37.5 per share.

This valuation represents a 40% premium on Chuy’s 60-day volume-weighted average price and a 10.3x implied multiple of the adjusted EBITDA [earnings before interest, taxation, depreciation, and amortisation] for the period ending March 31, 2024.

Darden Restaurants anticipates estimated cost savings or incremental revenue of US$15 million before tax by the end of the 2026 financial year. The multi-restaurant operator also anticipates acquisition and integration-related expenses of between US$50 to US$55 million.

The multi-brand restaurant operator also revealed the acquisition is neutral to its diluted net earnings per share for fiscal 2025 and accretive by approximately 12 to 15 cents in fiscal 2027.

Rick Cardenas, Darden Restaurants’ President and CEO, said, “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.”

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